The goal of American Airlines is to provide passengers with exceptional comfort and security, as well as first-rate services and a competitive edge via attractive pricing. By providing the greatest advantages, simple booking, and a fantastic experience, the organization has differentiated itself from its competitors by offering better services. American Airlines offers online reservations, web sites, social media platforms, and the biggest aircraft size in order to compete on service.
The demand for more clients has placed it at the top of the industry. The name “American Airlines” refers to an airline based in Texas with its headquarters. With no fewer than 7,000 flights each day, including over 300 destinations, the firm serves extensive global and local travels (Hannigan, Hamilton III, & Mudambi, 2015). It is the largest airline across all three criteria: fleet size, annual revenue, and distance traveled; but it is ranked second when compared to the number of terminals served.
The Company and its Goods/Services
Prices start at $12
Prices start at $11
Prices start at $12
The primary goal of American Airlines is to provide passengers with the utmost level of comfort and security during flight, as well as efficient handling of their belongings, a fantastic experience, and a competitive advantage at reasonable prices. OneWorld Alliance was formed by AA in order to manage expenses, services, and required plans with its associated partners.
Dallas International Airport is the largest passenger way in the United States for American Airlines, with more than 50 million people carried each year and approximately 150,000 every day. Furthermore, the airline employs over 100,000 people.
Upholding Competitive Benefit
American Airlines’ main competition comes from air carriers that fly to international locations. Delta Air Lines, United Continental Holdings, Southwest Airlines Company, and JetBlue Airways are the airline’s most powerful rivals (Thomas & Kummer, 2015). American Airlines distinguishes itself from its competitors by adopting methods of ensuring optimum benefits, simple booking, and an incredible journey.
The airline has established online booking, web sites, and a large fleet size as a result of competing on service. Because its popularity by a huge number of passengers has put it in the top position in the industry, American Airlines has much to gain from its competitive edge. American Airlines’ competitors have fewer travel destinations, giving it a better earning potential.
American Airlines has established operations in five hubs, which are strategically positioned to attract a large number of passengers. The hubs are located in the busiest cities in America and include John F. Kennedy International Airport and Dallas International Airport to name a few (Hannigan et al., 2015).
In May 1981, American Airlines launched the AAdvantage loyalty program, which has been immensely popular and has amassed over 70 million members since its inception. Regular passengers receive a reward that is proportional to their booking rate and the cost of their journeys under the program.
In AA, the individuals are organized in accordance with a set criteria so that everyone may benefit. AAdvantage Executive Platinum, AAdvantage Gold, AAdvantage Standard, and AAdvantage Platinum are the different categories. Customers obtain low-cost vehicle rentals, trip redemptions, and hotel stays for free as a result of their AAdvantage card membership (Thomas & Kummer, 2015).
The AAdvantage Standard is designed for those who can’t afford to pay full fare, as well as those who don’t travel all that often. It plays a critical role in allowing the firm to maintain a significant market share during tough economic conditions by attracting the high-income passengers and people who travel frequently with the AAdvantage Executive Platinum.
The AAdvantage Gold and Platinum programs, like the other loyalty plans before them, provide attractive advantages for consumers, making it appear unreasonable for them to switch loyalty to the competition. Passengers are hesitant to select a different firm since they want to collect bonus points on AA’s loyalty program, which translates to greater perks.
Customer Communication and Social Media
To stay in touch with its customers and potential clients, American Airlines uses a variety of platforms to provide continuous communication and rapid responses to inquiries. The company may easily connect with its clients worldwide through Twitter, Facebook, and Instagram, beyond which it makes internet reservations easier and more pleasant.
AA maintains that all consumers are aware of the loyalty program and other services meant to improve its success through its frequent postings on social networking sites. In addition, the firm incorporates consumer opinions and demands raised via social media and other channels of communication into its planning processes to ensure that it continues to satisfy them better while continuing to protect their loyalty.
By providing a broad reach, promoting new information, and validating the company’s trustworthiness, American Airlines’ customer communication and social media efforts illustrate its competitive advantages. Customer communication and use of social media help to increase consumer knowledge and attract possible customers by raising awareness of the brand.
American Airlines, together with its local partners, services international and local travel with around seven hundred flights each day to over three hundred destinations. To maintain its outstanding success, American Airlines established the AAdvantage loyalty program. The plan has been extremely effective and has attracted over 70 million consumers since it began. Constant communication through Twitter, Facebook, and Instagram as well as online booking convenience and comfort have aided AA in keeping in touch with its clients across the world.
The majority of organizations apply a competitive advantage strategy to gain an edge over their rivals in the market. Since it is a multinational airline company, American Airline has a large number of competitors. Southwest Airlines, Delta Air Lines, JetBlue Airways, and United Continental Holdings are some of the companies competing with the American Airline Company (Tarver, 2017). The American Airlines Corporation ranks second among its rivals, behind only Delta Airlines. As one of the world’s largest airlines, it has more than 550 airports across 110 countries where passengers may wait for connecting flights or make purchases online (American Airlines).
Airlines confront a lot of competition. With the progress in technology, the Airline Companies have also improved their services, such as meeting client requirements and company functions like maintenance and communications, to stay competitive. To maintain a competitive edge over rivals, businesses have implemented technological methods to keep consumers interested and create a monopoly for themselves.
In addition, the use of technology has aided the organizations in performing their tasks more quickly. This essay will examine how information technologies are utilized by an American airline firm to retain and manage its customers as well as how they may be used to improve operations both internally and internationally.
C. R. Smith founded the first airline in the United States, Alaska Airlines, on April 15, 1926. Since then, this firm has evolved and some of the key adjustments have had an impact on its competitors (Airlines, 2017). The American Airlines began providing overseas air service in 1945. In November 1984, the American carrier unveiled its American Eagle System (Airlines, 2017). This was the first instance of technological progress for an American airline company.
The American Eagle system was set up to provide data security solutions and to allow customers to manage their information. The company also utilized the Audit services of the American Eagle System (Airlines, 2017). The above program was used in the firm’s operations with the aim of reassuring its clients about business continuity. Risk mitigation measures were made easier as a consequence of this software, thus one of the main goals was customer care.
The American Eagle system software also supported internal use of web-based applications and mobile apps, allowing the American Airline Company to improve its management system (Airlines, 2017). In November 2008, the America Airline launched mobile boarding passes. Travelers utilized the mobile boarding pass to book their trips and provide any necessary information for securing a flight. Customers were able to find the aa.com and book flights from their locations using the mobile boarding passes. The introduction of the mobile boarding pass by an American airline was beneficial in pushing the firm above its competitors ( Airlines, 2017).
Current information technology
The SABRE on-line reservations system was developed by the American airline. This mechanism improves company efficiency by enhancing consumer, supplier, and other participant interactions (Sabre.com, 2017). The firm’s market position has been significantly altered following the introduction of the SABRE on-line reservations system by the American airline.
The American Airlines has also retained its competitive edge thanks to the availability of SABRE online services. This program has provided the American airline business a degree of competitive advantage over its competition. This firm has obtained market share leadership through the SABRE online services (Sabre.com, 2017).
The transition of the IT system of the American airline to a single passenger service was made easier thanks to the SABRE online service, which helped in 2014 (Sabre.com, 2017). Employees and customers may benefit from seamless advantages throughout their journey because to the success of this goal. The current software used by American airlines is referred to as SABRE. This platform has aided in reducing any delays within the systems by enhancing customer accessibility.
The entire reservation system, from flight schedules to the customer experience, delivers the greatest possible customer experience. Customers and employees rely on this program to get access to information that meets their demands. The status of a location where a passenger’s check-in and board flights is provided through preparation for flying SABRE systems. Finally, the SABRE luggage retrieval system for the United States airline corporation allows employees to match and locate luggage according to their destinations using this reservation software (Sabre.com, 2017).
The American airline has maintained its capacity of customers and rivals while keeping up with information technology by utilizing the progress of information technology. Information technology has played the most important role in enabling the American airline to maintain its competitive edge. This firm competes against a lot of competitors, and IT is being used as a marketing tool by overseas companies for their international businesses. The use of IT in providing a competitive advantage enables consumers to win, which helps businesses operate smoothly, such as management and system maintenance techniques.
The application of technology to the airline business in America is something that has been ongoing for some time, with American Eagle systems being one example. The technological advancements have aided the company’s customer service while also assisting employees. As a result of IT solutions, therefore, the American carrier group has been able to preserve its competitive edge.
American Airlines (American) recently implemented four significant rate changes. First, it switched to a four-tier structure; American Airlines offered first-class fares and three tiers of coach: full-fare, 21-day advance purchase, and 7-day advance purchase. Overall, it expected to decrease coach tickets by 38% and first-class tickets by 20%, lowering them from $937 in 2014 to $500 in 2020.
When compared to advance purchase tickets that were already available, full-fare coach fares decreased by about 38%, while advanced-purchase fares decreased by 6%. Through this fare structure, American also ended several huge discounts. Second, many major airlines’s negotiated discount contracts were terminated.
Small company travelers are both benefited and hindered by changes in airfares. The cheaper full fare prices attract small company customers. Previously, the higher full fare rates deterred small business travel; as a result, small firms would either decide against travel or pay for a Saturday night stay and purchase a discount ticket. Small companies will be able to buy more convenient flights at lower costs as a result of this change.
On the other hand, small businesses may be harmed. Because many large enterprises had volume contracts with airlines, the new full coach fare might be greater than these agreed-upon charges. The fares for big firms without negotiated contracts will be lower than the previous full fare rate.
The new fare structure will benefit everyone from leisure travelers to business people. These individuals have greater freedom and may take advantage of the advance purchase incentives and Saturday-night stay discounts. The exception is for leisure passengers who had discovered “loopholes” in the old fare system by using “creative ticketing” and waiting for significant price cuts.
This essay aims to provide a review of the SABRE booking system developed by American Airlines, demonstrating how Business Information Systems (BIS) may be used to gain a strategic advantage. This will be done by describing American Airlines’ overall strategy and how SABRE gave them a competitive edge. The factors that led to American Airlines losing their competitive edge will also be addressed. Enhancing customers’ experience is one of the most crucial aspects of delivering an exceptional service. Maintaining convenience, flow of knowledge, time savings, and optimal use of existing customer service resources are all important elements in this process.
On the other side, when there is a lot of competition, services like this are quite essential for businesses to be able to provide at the lowest cost and in the most convenient way possible (Linoff & Barry, 2011). Customer management software programs are now available that allow people and companies to organize all of their data and retain important information quickly and effectively.
The best way to understand the importance of such programs is to look at their potential benefits. Such systems, for example, can help manage revenue, make optimal pricing judgments, manage customer loyalty programs, profile customers and bookings and reservations. The American Airlines reservation system, which was developed in the 1960s as a result of a collaboration between IBM and American Airlines, is one such program (Linoff and Barry). The term SABRE stands for “Semi-Automated Business Research Environment.” It was the first information system of its kind, created by American Airlines in cooperation with IBM.
It was originally used as an electronic reservations system and took the place of a hand-written reservation procedure. This allowed American Airlines to more efficiently maintain its reservations using a computer-based application (Duliba et al., 2001). The initial installment of the system cost about $40 million and was nearly as sophisticated as the one used by the United States government. This was a significant step forward for American Airlines, since one of its primary business processes had been automated, making other activities easier.
By the mid-2000s, SABRE was able to organize customer data and produce sophisticated decision support for airline customers. New functions were added to SABRE in subsequent years, laying the groundwork for efficient revenue management, optimal pricing decisions, flight scheduling, cargo and inventory management, crew rotation, and a variety of other aviation operations. More recently, e-commerce applications and a variety of hotels , car rental agencies , travel agencies , and other travel and leisure businesses have been integrated to allow customers access to additional areas of interest with only a simple click of a mouse (Varian Associates 2010).
The airline industry’s first computerized reservation system was originally intended to be used throughout the country by American Airlines. The system, which began to automate the travel sector in the 1970s, was installed in numerous travel agencies across North America and Canada during that time. Over one million fares were recorded in the system, making operations at a travel agency more efficient. American Airlines could simply notify agents about changes in fares and available choices because of this system.
Throughout the past few years, American Airlines has been testing a variety of different applications from various vendors to integrate into their existing Sabre system. SABRE was a key component behind American’s success and gave it many benefits.
All operations became more efficient, information was distributed more readily, and American Airlines rapidly rose in popularity among its clients. Customers were given the opportunity to compare a variety of alternatives available to them through one platform, which they would not have been able to do previously.
Customers now had access to special discounts, booking tickets for several locations, and comparing fares through one system. In the same way, American Airlines was able to quickly sell each seat by finding best prices for selling seats, swiftly managing their flight schedules and employee rotation, and rapidly distributing information to travel agents. As a result, they were able to sell American Airlines tickets on a wider scale (Burgelman et al., 2008).
With this system closed to other airline enterprises, American Airlines has enjoyed a significant cost leadership, innovation, and product differentiation advantage. Cost leadership refers to the ability of American Airlines to save money while delivering comparable services at a lower price or providing greater value for the money paid. Since the SABRE Reservations System gave American Airlines several convenience and information benefits, it enabled the firm to cut staff expenses by roughly 30%.
This was due to the fact that fewer people were required to execute specific tasks since the system enabled the efficient performance of the same activities at a quicker rate. Sabre Airline Solutions’ application allowed for new revenue management techniques and airline profit maximization, as well as services such as yield management and crew rotation.
The fact that the airline industry was able to reduce costs and provide excellent services at a lower cost than its competition is directly due to this technology. It also gave consumers with alternatives such as the BargainFinder, which helped them find low-cost fares, as well as an application that allowed American Airlines to set fare prices while comparing their own prices to rivals. As a result, because so much information was available, it was simple for American Airlines to achieve cost leadership by lowering expenses while providing customers higher-quality service (Melville and Ross, 2010).
The American Airlines SABRE system was one of the airline’s greatest competitive advantages, as it was the first to use it. This new innovative technology gave them the opportunity to start practices that no other firm had previously been able on. Personalized service and the ability to manage their bookings, reservations, and all travel arrangements in one place at a reduced price were two tremendously innovative elements of the SABRE reservation system (Melville and Ross, 2010).
The notion of invention implies developing new items or making modifications to existing goods, and American Airlines was able to profit from its innovative product by adding new features such as the aforementioned BargainFinder, Sabre Airline Solutions, and easySabre. These alternatives and new features added to the inventive aspect of American Airlines because they were always giving their clients and themselves with fresh alternatives and services.
As a result, American Airlines was able to introduce new services and features on a regular basis (Stair and Reynolds, 2012). Product differentiation was also accomplished with the help of the SABRE system since American Airlines could provide its customers with items that were not available from other airlines.
Offers were made only to specific clients, and the many available apps were customized and differentiated to suit the demands of distinct customer groups. Customers who wanted low-cost bargains could use the applications to locate inexpensive rates, book hotel and automobile accommodation, and find and purchase certain items all in one location. Furthermore, easySabre – a customer relationship management solution – allows for a tailored service for each customer by providing them choices and information based on their own requirements.
As a result, American Airlines gained a competitive advantage in product differentiation (Stair and Reynolds, 2012). Competitive advantage is the advantageous edge or benefit that a firm may have over rivals. Because it was the first business to implement an extensive and technically advanced information system with SABRE, American Airlines had an edge over its competition. The system provided cost savings and communication channels that no other business offered.
Furthermore, organizational capabilities and revenue management systems enabled the firm to be more efficient and effectively target its clients by providing a personalized service. As a result, American Airlines was the most connected business among all of its rivals, allowing it to provide and utilize services from an information system that other businesses did not have access to (Bocji et al., 2009).
American Airlines had the benefit of developing barriers to entry and cost leadership, making it more difficult for other firms to compete in the airline sector. American Airlines faced additional competition from existing carriers, which made their survival seem doubtful (Power and Shards, 2009).
With this in mind, it has been shown that American Airlines employed their reservation system to gain competitive advantage in a variety of ways: lowering costs compared to rivals; differentiating services by adding unique features and options; introducing high switching costs for consumers so that they would become acclimated to the Sabre system; erecting costly entry barriers for rivals; and forming partnerships with IBM to design the system ( n.d.).
In the 1980s, SABRE emerged as a distinct firm with shares traded on the stock market, severing ties with American Airlines and perhaps signaling the company’s expiration of competitive advantage. It became clear that American Airlines’ competitive edge was not permanent; the company’s market position began to deteriorate over time.
When other businesses gained access to the system and it was linked to a variety of travel agencies and airlines, problems arose. However, after incentives such as the cancellation of commissions for travel agents were removed by American Airlines, many travel agents and websites began to hide the fares offered by American Airlines and avoid displaying them.
Because of the current dispute between Sabre and American Airlines, many travel agents may be driven out of business as they are unable to sell American Airline tickets. While the SABRE system has grown to provide access to additional airlines and allow connections among travel agencies around the world, American Airlines has lost its main competitive advantage and is no longer able to use it as a unique technological innovation.
However, if American Airlines decides not to sell its tickets through the system as a result of the damage in confidence between the two firms, it will affect travel agencies all over the world and put SABRE’s (Sabre Holdings) popularity at risk (2012). American Airlines may choose to retaliate against the loss of trust between the two companies by establishing another information technology. This might hurt Sabre badly, while American Airlines may incur additional switching costs in adopting a new system and opening travel agents access to software that is compatible with theirs.
However, before their contract expires in August, Sabre may attempt to resolve the issues between it and American Airlines; as a result, American Airlines could be able to keep using the system they originally launched (Curtis and Cobham, 2009; Reinartz et al., 2004). This essay has shown that information systems’ importance and usefulness can endure for a long period of time until the systems become obsolete and no longer function.
However, sustaining a system’s competitive advantage in today’s market is difficult as other businesses may gain easy access to the system and technology may spread faster than expected (Curtis and Cobham, 2009). As a result, while American Airlines’ initial installation of the system in the 1960s gave them a competitive edge, they were unable to maintain it in an era of technological progress.
Other firms also began to benefit from the system once it was implemented by Sabre, which connected other businesses to the system and travel agencies utilized it to find the cheapest airfares among all airline operators (Payne and Frow, 2005). As Sabre went public and became a distinct firm, it began to pursue its own goals while charging booking fees to airlines that advertised their fares on its platform. When American Airlines opposed these unnecessary expenditures, difficulties between the Sabre system and airline service provider arose.
In conclusion, competitive advantages are not permanent in today’s business environment. In order to preserve such advantages or improve their position by using better and more advanced technology than they currently employ, firms usually must continue to innovate in other areas. American Airlines has been unable to maintain its competitive advantage and keep barriers to entry high for competitors since it lost control of the SABRE reservation system. They still have a solid foothold in the Sabre-American Airlines conflict, and they may be able to reclaim their previous dominance.