In this section four airlines chosen from four different regions of the world are analyzed based on their Political, Social, Economic and Technological strengths and weaknesses.
In the times of steeping fuel costs, recession in economy and rising security threats, the commercial airlines have been the ones that are hardly hit.To keep their heads above water, they need to be aware of their strengths and weaknesses from different areas of operation and act on it in a timely manner. The four airlines that have been chosen are – American Airlines from the America, Cathay Pacific airlines from Asia, Virgin Blue Airlines from Australia and Easy Jet from Europe1.1 American Airlines PEST AnalysisFor the present report, American Airlines has been chosen. The American Airlines is the largest airline in the world. For the past five years from 2001 to 2006, American Airlines has seen a period of continuous losses.
While the airline industry as a whole was plunged into such a situation, there were certain players like Southwest who have shown continuous profits and increased consumer and employee loyalty. To change its existing condition American Airlines management has developed a “Turnaround Plan”.According to this company wishes to make an about face and reach a target revenue of $4 billion (Garton 2007). The detailed information regarding the airline’s background, present marketing strategy, financial position, and its future outlook is presented in the later section.
This section presents a general PEST analysis of the American Airlines which will give a feel of the current business environment in which the airline operatesPolitical – While the airline has not been under direct control of the government since the deregulation in 1978, the government still controls several aspects of the operations of the airline industry in general apart from the matters directly related to public safety.Some legislation such as the compensation for passengers when the flights are either delayed or cancelled, for lost, delayed or damaged baggage etc. would adversely affect the airline, considering its massive operational size and reach. Security issues are a major headache of all the airlines operating in USA.
Government charges fees for every enplanement the price of which tends to be hiked regardless of the government of the center.This is another major problem for American Airlines since such fees may not have the option of being passed on to the customers. While domestic fares are under the control of the airline, government has regulations over the prices of the international tickets, which could be limitation in the present day world (American Airlines, 2008, p 7-8).Economic – The recession in US is a major blow to the airline operators in the country. As it is post September 11, 2001, the number of passengers opting to fly had been reduced, and the number are steadily decreasing. With the stiff competition faced from low cost carriers like SouthWest and Jetblue, the airline also needs to optimize the price it charges for tickets.
The increase in the fuel prices in recent times are an additional problem for the airline (American Airlines, 2008, p 11-12).Social – Airline industry is labor intensive. This creates a lot of trouble chiefly for American airlines companies, because of the tight labor regulations. Since most of the employees are with some or the other labor union, each of them hold separate bargaining agreements.
The size of labor force of American Airlines, which is a whopping 85,000 at the end of year 2007, makes the situation even more difficult and complex to control (American Airlines, 2008, p 10-11)Technological – Airline companies have to move ahead with times. As such they have to spend finance as well as manpower in areas such as website development and mobile alert services. American Airlines has taken good advantage of these factors by introducing lucrative offers for the customer, which was a key area of the strategy of bringing it back from the verge of bankruptcy (American Airlines, 2008, p 12).
