Porter’sFive Forces Analysis of American Airlines
|Industry||Airline Transportation and Cargo|
|Headquarters||Forth Worth, Taxes, United States of America|
|Revenues||US$ 29.8 Billion (Approx.), As of Dec 201|
|Profit/Loss||US$ –2.4Billion (Approx.),As of Dec 2021|
|Competitors||Delta Airlines, Southwest Airlines, United Airlines|
Headquartered in Forth Worth, Taxes, United States of America, American Airlines is founded in 1926 by C.R Smith and Donald Douglas. American Airlines ranked 114th by Fortune 500 gave a record recovery revenue of US$ 29.8 Billion, with a net loss of US$ 2.4 Billion and net asset of US$ 66.46 Billion, as of FY ending Dec,31,2021.American Airlines ranked on 835th by Forbes Global 2000 2021 in the category of World’s Largest Airline & Aerospace Companies In 2021.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis, defined by Professor Micheal E. Porter in 1979, at Harvard Business School is one of the most widely used tool for taking better strategic decisions.The Porter’s Five Forces Analysis guides the company’s in the directions which will be less exposed to competition and will provide better profits.
American Airlines Rivalry among Existing Competitor
- American Airline Operations: American Airlines is operating in more than 50 countries via 350 destinations having 123,400 employees with a fleet of above 1500 aircrafts. American Airlines also received 77/100 in American Customer Satisfaction Index(ACSI) with a 19.5 % domestic travel business of USA Market, carried 165.7 million passengers abroad which is a 23% drop in activity compared to 2019.
- American Airline Revenue Segmentation: American Airlines operating in Passenger and Cargo category with a revenue generation of US$ 26.03 Billion and US$ 1.31 Billion, as of FY 2021, compared to prior year Passenger category generated US$ 14.5 Billion and Cargo category US$ 0.76 Billion, as of FY 2020. .While Other Revenues are of US$ 2.5 Billion in FY 2021, compared to prior year US$ 2.0 Billion in FY 2020.
- American Airline Business Performance Analysis FY 2019 –FY 2021: The American Airlines reported a record recovery revenue of US$ 29.8 Billion in 2021 which is an increase of 70%, as compared to previous year US$ 17.3 Billion in 2020 which is a drop of almost 60% compared to FY 2019, the revenue generated Pre-Covid times was US$ 45.76 Billion in FY 2019.
- Delta Airlines: Delta Airlines gave a record recovery revenue after COVID -19 impact of US$ 29.9 Billion, which is very close to American Airlines, with a Net Profit of 0.28 Billion Profit, with net assets of US$ 72 Billion in Financial Year ending December 31, 2021.Delta Airlines holds a 16.3% of domestic share as compared to American Airlines which holds 19.5% of domestic American Travel Business, as of FY ending Dec 2021.
- Southwest Airlines: Southwest Airlines gave a record recovery revenue after COVID -19 impact of US$ 15.8 Billion. Southwest Airlines holds a 17.4% of domestic share as of FY ending December 31, 2021.
- United Airlines: United Airlines gave a record recovery revenue of US$ 24.6 Billion in FY 2021 with a hold of 12.9% of domestic market share as of FY ending December 31, 2021.
- Competitive Rivalry (Delta, Southwest and United Airlines): The competition is very close especially between Delta and American Airlines, also these Airlines are operating for the same niche with the same services and destinations offered increasing the cut-throat competition.
American Airlines Threat of New Entrants
- Highly Saturated Market (Specially Domestic US Travel Business): The travel airlines companies specially included Delta, United and Southwest are in close competition with American Airlines and competing for the same market, which further saturated the industry specially domestic US travel market.
- Toughest Competition (Capital,Technology,Trained Human Resources, Technical Capabilities) : As the market already reach to it’s maturity with identical services offered and in the presence of established players there will be more tough competition in terms if high capital and technological requirement. Also competing companies which already reached to economies of scale and offering low cost solutions will be highly challenging.
- Travel Industry Volatility: As due to continuous unfortunate events including COVID 19 and Ukraine-Russia war travel industry is continuously impacting which will further discourages new entrants to enter the industry in the long run. Such down turn also happened after 09/11 World Trade Centre event.
American Airlines Bargaining Power of Suppliers
- Various Identical Services & Supplies: The supplies pool is diversified with an identical product or service requirements so supplier bargain power is not threatening in American Airlines scenario. The products or services comprising the supplies pool consist of catering to maintenance facilities.
- Diversified Supplier’s Pool: American Airline believes in diversified pool of suppliers included small business from minority, women, disabled and LGBTQ. American Airline mentioned that working with a diverse group is the core of their success, by Rober Isom, CEO of American Airlines.
American Airlines Bargaining Power of Buyers
- Customer Satisfaction Score: The American Airlines scored highest all other Airlines by scoring 79 in a customer satisfaction survey, while United, Southwest and Delta Airlines scored 77 points, as of 2022.
- Brand Value: Southwest Airline possess a brand value of above US$ 6.7 billion declared by Statista as of 2019 in competition with Delta Airlines holds a brand value of US$ 7.3 billion, United Airlines and American Airlines which possess a brand value of above US$ 5 Billion.
- Brand Awareness: American Airlines which holds 83% of brand awareness in U.S. market, while United Airline and Delta Airlines both holds 81% brand awareness. The Southwest Airlines holds 75% brand awareness in U.S. travel market, while JetBlue Airways holds 67% of the brand awareness.
American Airlines Threat of Substitute Products or Services
- Ukraine War, Air travel Industry and American Airlines: Due to closed space because of Ukraine war air-travel companies are taking long routes expensing our more fuels which further resulting into high prices.US Airlines specially facing a special ban from Federal Aviation Administration for over flying Ukraine and many parts of Russia. Only till March end 2022,around 236 flights re-routed themselves which directly impacting the operational cost.
- Global Aviation Industry: The Aviation industry negatively affected due to COVID-19 pandemic even it was in a recovery phase and badly hit by Ukraine-Russia war state.Russia banned 36 countries includingUSA to fly over Russia’s air boundary
- Forbes, Profile, American Airlines, Available at Forbes
- Fortune 500, American Airlines Group, Available at Fortune 500
- History of American Airlines, Available at American Airlines
- Forbes,(May 13,2021) Forbes Global 2000 :The World’s Largest Airline & Aerospace Companies In 2021.Avaiable at Forbes
- American Airlines Group
- Statista (March 11,2022) American Airlines Group’s operating revenue from FY 2009 to FY 2021 (in million U.S. dollars).Available at Statista
- Statista (August 25,2022) American customer satisfaction index scores for airlines in the United States from 1995 to 2022*.Available at Statista
- Statista (January 3, 2023) Leading airline brands ranked by brand awareness. Available at Statista
- Statista (October 30, 2022) Number of schedule passengers boarded by the global airline industry from 2004 to 2022 (in millions). Available at Statista
- Statista (October 29, 2022) Number of flights performed by the global airline industry from 2004 to 2022 (in millions).Available at Statista
- United Airlines-Statistics and Facts (Oct 29, 2022).Available at Statista
- American Airlines-Statistics and Facts (September 7, 2022).Available at Statista
- Statista (March 17,2022) Delta Air Lines Inc’s operating revenue from FY 2008 to FY 2021 (in million U.S dollars).Available at Statista
- Statista (September, 28, 2022) Market size of the airline industry worldwide from 2018 to 2021 (in billion U.S. dollar) | Statista.Availableat.Statista.
- Statista (August, 29, 2022) Average prices for Boeing aircraft as of March 2022, by type (in million U.S. dollar) | Statista.Availableat.Statista
- Statista (March,11 2022) Number of Passengers enplaned by American Airlines from FY 2014 to FY 2021 (in millions)| Statista.Availableat.Statista
- Statista (July,27 2022) Domestic market share of leading U.S.airlines from January to December 2021| Statista.AvailableatStatista
- Statista (March 10,2022) Southwest Airlines Co’s operating revenue from FY 2010 to FY 2021(in million U.S. dollars).Available at Statista.
- Statista (April 4,2019) Delta Becomes Most Valuable Airline in the World. Available at Statista
- Simple Flying,(February 25,2022) FAA Bans US Airlines From Ukraine Airspace. Available at Simple Flying
- AIR, Airport Industry Review, How will the Russia-Ukraine conflict impact aviation? Available at AIR
- Statista (June 10,2022) Number of flight paths rerouted by airlines worldwide because of the conflict in Ukraine as of March 28,2022 by route. Available at Statista
- American Airlines ,Supplier Diversity