American airlines case

CASO AMERICAN AIRLINES

1) First change introduced by the company change on fare system.
They reduced the types of fares from 16 to 4:
* First class are
* Coach fare
* 2 discountfares (one with purchase 21 days in advance and another one with 7 days/advance purchase)
Lower prices for Businesses and leisure travelers
With this fare reduction they saved $25m/annually
Theyreassigned 600 EE
Fare revision was NOT intended to be short term. The system was just not working and they decided to change it.
Publicity new system was advertised nationwide the plan was to avoidcrafty travelers to cheat in order to get more than discount tickets than intended

2) Second change Still no refunds but they allowed the traveler to pay $25 in order to reschedule at advancepurchase fare and dependable of length of the stay.
This did not apply to international flights because they were tied to foreign government’s regulations.
Intention: Fare cuts will lead to anincrease in traveling.
* AA anticipated a $100M loss in next 3 month from the introduction of the fare changes but foreseeable profit increase of $900M annually in the future
* AA foresaw theEconomy to grow strongly
* AA intended to revigorate the business travel markets for small businesses
Most airlines followed AA initiative but from the distance:
Continental airlines operated underchapter 11 of Bankruptcy protection act and they partially matched fares but either lowered them or raised them dependable on market
THREAT! Other airlines feared AA to lower commissions (10% offares) or to impose commissions based on sliding scale*, but they didn’t lowered commissions.
No frequent flyer program changes foreseen by AA
Continue with discounts to senior citizens

Aims of thechange:
1) Pursue more people to fly
2) Discipline airline industry
Motivation to have the fare structure act as a fare structure. Nothing more behind it or nothing else intended.
AA was...