AMERICAN AIRLINES INC.

: REVENUE MANAGEMENT
PRESENTED BY:Neha(A01) Surbhi(A02) Dewesh(A03) Birbal(A04) Gagandeep(A05) Tanu(A06)

IN 1988 Operating income = $801 million Revenue = $8.55 million AMR Corp. = Largest Airline in US 468 aircrafts on 2200 flights daily to 151 destinations in US , Bermuda , Canada , Mexico , Caribbean , France , Great Britian, Japan , Spain ,Switzerland, Venezuela , and West Germany.

Airline Deregulation and competition

Before 1978 Civil Aviation regulated by CAB Commercial Airline industry as oligopoly Route/fare charges needed CAB approval Approval took time Airline Deregulation act gave airline the freedom to enter or exit routes and alter fares according to them .

Cost Containment
Low cost entrants set aggressive fares To capture market share on some routes Price competition developed in industry Negative impacts on profits Became element of competitive strategy Labor cost reduction and productivity improvement = important

Two Tier wage structure

1983 To reduce labor cost Affected current employees but sharply reduced wages for new hires To achieve productivity gains American negotiated with maintenance and transport workers, flight attendants , pilots , flight engineers and other employees for work rule concessions laid down by FAA

 Fuel and maintenance cost =operating expense Dependent on price of fuel , fuel use efficiency , FAA regulations on aircraft usage maintenance, the airline own aircraft usage and maintenance policies and traffic volume Replace older , less fuel efficient aircraft with newer , more fuel efficient models New planes= cheaper to operate + smaller crew +improve electronics + less noisy and polluting+ cheaper to maintain.

Route Structure
Free entry and free exit made it element of competitive strategy Evolution of hub and spoke system. At end of 1988- American operated one of the most extensive route systems in US

REVENUE MANAGEMENT
1978- ADA gave airlines to alter their fares as soon as they wished. Took full advantage. Offers on fares as many as possible- Revenue maximized.

To Achieve this Airlines needed:

Data on populations travelling habits & preferences. Analytical tools with which to process the data & make decisions on fares & seat availability. Computerized Reservation System

In 1987 Pricing decision for Chicago-West Coast Routes Served 10 west coast cities from Chicago In nonstop market- American & united competed on the basis of fares, flight schedule & factors. American and united offered comparable fares on their connecting routings. Offer a relatively unrestricted discount fare on our non stop Chicago-West Cost Flights

In 1988 New York- San Juan pricing Decision, predominant fare