I’m sure we can all remember a time when American Airlines was going bankrupt and their stock was worth close to nothing. It has been about ten years now since then and they have continued to grow as a company. During the past ten years American Airlines used bankruptcy protect to cut costs and allowed almost all of their flying from only five U.S. cities. This type of management strategy allowed them to survive after September 11th and throughout this decade. Now, at O’Hare, they have their own terminal for domestic and international departures and international arrivals. It’s almost hard to imagine they have come this far.
Since they will be exiting bankruptcy protection, they decided to come up with a new management strategy to deal with the upcoming costs and exit bankruptcy. Even though American has a market leading position on flights between U.S. and Latin America, they need to focus on their weakness with continental Europe and Asia. They have introduced new flights to Germany, South Korea, and Peru. Their flight to Germany will be from Chicago to Dusseldorf. They also plan on introducing some new domestic services (Nicas). American believes this strategy will increase their departures by 20% over the next five years while they try and exit bankruptcy.
American’s C.C.O. said, “An underlying foundation of the business plan has been to diversify our portfolio of flying and increase our mix of international flying” (Wall Street Journal). I personally couldn’t agree more with this statement and if I was looking to do this, I would start with the weakest parts of my management strategy. I would search for the gaps in my market and do whatever I could to bridge those gaps for my consumers. That seems like the smartest plan to me. I have begun to wonder if it will cost as much as a regular flight or if they will be trying a new competitive angle.
Do you think the American Airline’s expansion to continental Europe and Asia is a smart management strategy? How will the addition of these new services affect the price of tickets in the future?