American Airlines Set to Upgrade its Fleet and Airline Hubs

American Airlines, which began its merge with U.S. Airways a year ago, has announced plans to upgrade its planes and airport hubs. The airline company stated that it will spend nearly $2 billion on upgrades. The investments will go to improving in-flight entertainment in addition to renovating lounges and check-in zones. Nevertheless, American Airlines is late to the party in terms of providing a comfortable flight and wide-array of entertainment options on its flights, especially for international routes.

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The decision to improve its flight experience stems from growing customer dissatisfaction, which has skyrocketed since the merger. During the merger, the firm decided to keep the standard of the least-cost carrier. And although low costs are important for firms, only so many corners can be cut without sacrificing consumer benefits. As a result, many consumers are flocking to Delta as the firm has revamped its image to that of a premium airline service. Product differentiation is important in the airline industry, particularly for first-class fliers who want the most comfortable flight experience. American Airlines has come under fire for awful first-class service – mostly due to scaled-back food options.

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American has rolled out new advertisements in an effort to draw back more customers. The advertisements are both informational and persuasive: many of the ads detail the new improvements that are being undertaken by American, while others use catch-phrases such as “We’re going for great.” Nonetheless, it will take time for all of the upgrades to be implemented, so the success of the ad campaign may be limited.

3 thoughts on “American Airlines Set to Upgrade its Fleet and Airline Hubs

  1. I’m unfamiliar with how effective advertising is for airlines, but it seems that it would be difficult to lead to a large increase in demand through persuasive advertising. US Airways has ranked near the bottom in terms of service for a few years and my impression is that this reputation has lingered with consumers. What consumers ultimately care about is getting to their destination at the cheapest price, but airlines tend to have similar prices in the US which makes service more important (though recent advances in technology have increased the effectiveness of price discrimination and made the Bertrand story more difficult). For consumers that have had bad experiences with this airline and see it on the bottom of customer service rankings, any persuasive advertising campaign would have to be extremely effective.

  2. American Airways is strategically making problems for themselves. A merger is often only beneficial if it cuts costs. Renovating check in zones could be a start, as they still seem archaic and inefficient, but the merger can’t be successful if they need to rebrand a now larger image. While the company can now market half as much relative to two companies, I am not aware of how marketing plays a role in advertising. As I see relatively few ads for airlines, and know nobody with any particular preference, I imagine marketing costs are negligible to begin with. If American Airlines is going to merge and be successful, they can’t fight the effects of the merger. They should streamline processes, work to cut costs, and offer more affordable flights than can any one else. Spirit Airlines is well known to be the most inexpensive. But American Airlines should be able to operate under greater economies of scale and price Spirit out of the market. As economies globalize, there is real opportunity to make impressions in China, Brazil, India, etc., and cheaper airlines might find themselves in a really advantageous seat in those countries.

  3. From my end, routes and pricing matter. That’s not irrelevant for airlines, as they need to keep reasonably full even if the margins for first class are … superlative in class. But it also matters to those who pay more: direct flights and better connections matter, as does the rate of on-time arrivals (and hence missed connections). The post doesn’t try to address those, but they’re important.
     
    Delta may be premium, but they dropped direct Roanoke-Detroit flights. So now no matter who I use, I have to change planes. So I look at price, and within that for time of departure and extent of layovers. Generally I get reimbursed, but I don’t treat that as an excuse to ignore cost/benefit aspects. Ditto with lodging. And with a reputation for being careful on big ticket items, I can treat myself to a nice glass of wine and steak, and get reimbursed without hassle…
     
    In any case, there certainly is some merit in questioning the value of advertising and the impact of being “cheap” versus being “Value Conscious” (my phrasing).

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