Effects of COVID-19 on the airline industry
American Airlines is a major airline based in the United States of America and is headquartered in Fort Worth, Texas. It is the largest airline in the world when measures with the number of passengers it serves, the size of the fleet and revenue passenger mile. The company operates both in the local and the international market, and it operates about 6800 flights in a day to 350 different destinations that are located in more than 50 countries in the world. The airline still has the potential of expanding to the other parts of the world. Charles Lindbergh flew the first flight for American Airlines, which carried U.S. mail from St. Louis, Missouri, to Chicago (American Airlines, 2020).
The airline continued with the mail routes for eight years after which it started improving its capacity to carry people to and from different destinations in the world. C.R. Smith partnered with Donald Douglas intending to create the DC-3 which remodelled the airline industry. The plane enabled the company to switch from carrying mails to carrying passengers. The American Airlines was the first-ever airline to fly the DC-3 commercial flight from New York to Chicago on 25th June 1936. The American Airlines started trading in the New York Stock Exchange on 10th June in the year 1939. The airline then introduced the first Turboprop plane manufactured in the United States of America dubbed Lockheed Electra. The American then hired the first-ever African American pilot to ever work in a commercial airline on 3rd December 1964. The airline then merged with the Caribbean airlines with the aim of gaining the routes in the Caribbean highlands. The American Airlines has become the best airline company in the world, having the biggest fleet of planes and serving the biggest number of employees and serving the largest population in the world (American Airlines, 2020).
The airline industry
Who are the customers?
Customers are the most important stakeholders in the airline industry as the competition becomes intense in the industry. It is important to understand who the customers are in the airline industry in order to find out the best ways of satisfying them. The airline industry serves many clients from different social classes. The airline industry serves people from different social classes as they travel in different parts of the world. Most of the people travelling overseas use aeroplanes in their travel. The COVID-19 pandemic has cut down on the travelling activities by the people in the society (Hashem, 2017).
Environmental audit is important because it enables the company to be aware of the factors affecting business in the market and in so doing, the management comes up with measures of dealing with them for the benefit of the company. Business environment audit involves the assessment of both the internal and the external environment. The assessment of the internal environment involves conducting a SWOT analysis, whereas the assessment of the external environment involves conducting PESTLE analysis.
American Airlines has a superior market share in the United States of America that enables it to have more clients and desirable profitability. The company also has an extensive operational network that is measured using available seat miles and revenue passenger miles. The fact that it is the largest scheduled passenger airline in the world makes it to make more revenue since it serves a huge number of clients in the market. American Airlines also has strong alliances and tie-ups that increases the flight frequencies and in so doing it increases the amount of revenue made by the company. The fact that American Airlines has a loyalty flyer program which enables the clients to earn loyalty points for any flight ticket they purchase. They can later redeem the points for a free flight. The program helps the company to attract more clients. The management can make use of the strengths of the company to increase its performance in the market. (Augustine, 2013).
The fact that the company relies on a limited number of suppliers means that it is at risk of design defects, mechanical problems and inadequate performance. A large number of low-cost competitors in the market pose a threat to the company’s success as they take a substantial market share.
The growth of global tourism means that many people are travelling, a situation that will lead to an increase in the number of clients available for American airlines. The fact that the company has a large operation network around the world means that it will serve a substantial number of clients. It is therefore important for American Airlines to do its best to take advantage of the opportunity. The other opportunity is the growth in the U.S. airline industry. The growth in the industry means that there are many clients in the market that are supposed to be served by the companies available. The growth in the industry is, therefore, a good opportunity for American Airlines to grow. The cargo sector is also growing at a high rate meaning that it is the next big thing in the airline industry. American Airlines should, therefore, make many investments and take advantage of the situation (Li et al., 2014).
Intense completion in the sector is an issue of concern for many firms in the industry. The fact that competition is reducing a significant market share that belongs to American Airlines means that it is time for the company to put measures in place to deal with the situation. The growing security concerns and the airline accidents are potential causes of massive losses in the airline industry that may affect the company in future hence it is important to put measures in place that will help in reducing the air crashes, and they may also reduce losses in case an air crash occurs. The airline industry is also subject to various environmental laws. American airlines should, therefore, comply with the laws and regulations to prevent the lawsuits. The COVID-19 pandemic is threatening the economy of the world many countries have banned any form of foreign travel into their territories in a bid to combat the virus. The airline industry is therefore affected greatly as the number of travellers decline. This situation will definitely have an impact on American Airlines.
The external environment
American Airlines is a government-regulated company that works in accordance with the policies that have been put in place by the government. The company operates in 55 countries that have several political issues. For instance, the company has a challenge operating in various countries, North Korea because of political issues, but it can operate domestically and in the other countries that have political stability in the best way possible. After the 9/11 attack, the government of the United States of America put in place various measures that were aimed at checking the security of the airports and the country as a whole.
The International Air Transport Association revealed that it expected the number of travellers by air to double by the year 2032. However, the COVID-19 pandemic forces the management of American airlines to rethink its strategy and look for ways of improving its business. The emerging markets are a good economic opportunity that the companies are supposed to take advantage of as a way of increasing the market share. The safety concerns of the airlines also affect the economic aspects of the airlines as a good number of people choose to avoid planes as a result of the security concerns. The increase in people’s income and the emergence of low-cost airlines also makes many people want to fly.
People’s activities, such as tourism are seen as a huge boost to the airline industry. The fact that the people in the United States of America are looking for jobs abroad increases demand. The movement of people to the United States of America to work and for the other purposes increases demand in the airline industry which is important for the growth of the sector.
Technology has become part and parcel of the airline industry. It has improved comfort in the planes and promoted safety in the airlines. American Airlines also purchases planes that have fuel efficiency technology that helps the company to save billions in the cost of fuel and in so making the profit made by the company increases significantly. The airline industry is also making use of artificial intelligence and machine learning to analyze the problems faced in the airline industry and in so doing, they identify the problems and work on the solutions. American Airlines is also taking part in E-commerce by developing a platform where the clients can buy their tickets from the comfort of their homes than go to the airport at the time when they are supposed to report to the airport. Technology offers an opportunity for American airlines to grow its business and to increase their profitability in the market.
American Airlines has to be careful with regards to all the laws and regulations that various countries have put in place as a way of avoiding legal battles that would affect the operations of the company. The New York attack led to radical changes in the airline industries in the whole world. It is the role of American Airlines to ensure that it complies with the rules and regulations for the benefit of the company. It is also important to note that many countries in the world have put laws in place to combat COVID-19. American Airlines, therefore, has the role of making sure that they obey all the laws to prevent unnecessary conflicts with various governments in the world.
American Airlines is a very environmentally friendly company owing to the measures that it has put in place to prevent the causes of environmental degradation. The company is doing its best to include the environmental friendly planes to the fleet. It is the task of the management in the company to ensure that they adhere to strict measures that will protect the environment from any form of degradation.
Impact of COVID-19 on the airline industry
The management of the airline industry has changed greatly because of COVID-19. The number of staff has been reduced because of the virus since crowding will encourage its spread. The challenges to the economy have led to layoffs among various airline companies, the number of flights has been significantly reduced leading to losses, there have been absences in the workplace, some of the staff have been infected with COVID-19 (Sobieralski, 2020).
COVID-19 has messed up the plans that were put in place by various airlines. According to ICAO, airlines had planned to increase the seating capacity by 3.4% to cater for the growing demand. ICAO estimates that the seating capacity could drop by 39 to 56% from the above baseline. ICAO estimates a bigger reduction in the seating capacity in Europe followed by Africa and the Asia Pacific. The reduction in the seating capacity is indicative of the fact that COVID-19 has dealt the market a huge blow (Sobieralski, 2020).
The originally planned increase in the seating capacity had projected an increase in the passenger demand by USD 67 million compared to the year 2019. The latest estimates show that the demand could drop by USD 872 to 1236 million from the baseline above. Europe is likely to face the highest reduction in demand as far as the airline is concerned. The operating revenues that were projected to increase by USD 12 billion are now expected to plummet USD 153 to 231 billion. Most of the loss of revenue is expected in Europe and Asia Pacific (Sobieralski, 2020).
How the management can ensure the success of the company despite the COVID-19 pandemic
One of the ways of dealing with the pandemic is for the company to play its part in making sure that all the customers are protected while on board. The customers should be provided with masks and gloves as a way of minimizing contact among the passengers in the planes. The planes should also have sanitizers at strategic points to ensure that the customers and the airline crew are able to sanitize their hands before getting into the planes. It is also important to measure the temperatures of the clients as they get into and as they disembark from the planes. The employees that test positive for COVID-19 should be quarantined until they recover as a way of preventing the spread of the disease among the people in the plane and in the community. American Airlines may also donate money and protective kits to the community as a way of giving back to the community. Some of the challenges such as the loss of revenue, are somehow inevitable meaning that the company will have to deal with it. The airline may gain the confidence of the customers by putting measures in place that will help in curbing the spread of COVID-19 because people are more concerned about their health.
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Sobieralski, J. B. (2020). COVID-19 and airline employment: Insights from historical uncertainty shocks to the industry. Transportation Research Interdisciplinary Perspectives, 100123. https://doi.org/10.1016/j.trip.2020.100123