American Airlines Case Study 0

8/8/2019 American Airlines Case Study 0

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AMERICAN AIRLINES -2002

Case Analysis


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Company ProfileAmerican airline was formed in 1934.Largest airline in the world.AMR Corporation is committed to providing every

citizen of the world with the highest quality air travelto the widest selection of destinations possible.A subsidiary of the AMRCorporation, the airline is headquartered in Fort

Worth, Texas, adjacent to the Dallas-Fort WorthInternational Airport.It is fitting that as the co-creator of the DC-3 thatAmerican Airlines also be the airline that used themost machines over the years.


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Cyrus Rowlett Smith, President of AmericanAirlines had flown in the DC-2 and did not likesome of its performance .

Although it was a marked improvement over theprevious planes. It had the highest rated enginesin use at the time, but they felt it lacked power.It carried 14 passengers, two more than the DC-1.

It could not make New York to Chicago, non-stop.Smith wanted to give his customers safe,comfortable, and reliable transportation.DC-3 was then introduced with 21 seats.

Further introduced the 80-seat DC-7 and Boeing707 later.

Issues Under Smiths Presidency:


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The reputation of American Airlinesdeclined after Smith stepped down in1968.Apology letters were sent to passengersfor a provision of poor service.


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Robert Crandall and American AirlinesRobert Crandall joined AA as chief financial officerin 1973.He introduced many innovations like a

computerized reservation system.Introduction of the industrys first frequent-flyerbonus programCrandall became the President in 1980.

He introduced Job- Security.Introduced a policy of paying less to the newemployees despite union opposition.Consequently, ended the year making huge

profits worth half a billion.


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Customer and Employee FocusComputerized reservation system forcustomers convenience.Rewarding steady customers with frequent-flyer bonuses.AA has devised a performance feedbacksystem developing regular reports oncustomer satisfaction.It ranks top in Customer Satisfaction

Promising job security and sharing profitswith employees.Delegating authority to employees, takingtheir opinions while decision making andsolving problems.


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Motivation of employees in monetaryterms for good suggestions and ideas.Introduction of employee recognitionprograms that on one hand saves a lot of money and on the other hand develops asense of belonging in the employees.


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Internal issues SWOT AnalysisStrengths

Wide range of fleetsLarge Number of routes

Computerized reservation systemHigh Customer satisfactionGovernment relations

W eaknessesU nprofitable routesHigh capital costs and leasing of aircraft tocourier companies major financial factorsStrong unionism.


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More internal issuesW eaknesses

Too many divisionsReliance of business fares Fuel costsaccount for nearly 15% of airline coststructure. U se of hedging is common forfuel purchase.


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External issues...Oppo rtunities:

Increasing demand for air travel.U ntapped international market that AA could

penetrate in.Deregulation of international air travel.Expanding in National and internationalmarkets.Business travelers constitute major segments

followed by leisure travelers so catering themtoo.

T hreats:Losses, bankruptcies, layoffs common in airline

industry


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V igorous competition leading to cut throat pricingand slender margins. Competition spills over tosecondary market segments such as cargo andcharter air carriers, and other means of transportationAirline security cost have shot up dramatically.International competition rising owing toglobalization. Air deregulation, open sky policiesopening up new sectors to competition


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Case issues highlightedDeclining growth in domestic traffic andeconomies around the world.Further expansion to be undertakenoverseas.U nion Issues:

Push for salary increases whereas moneyrequired for automation at the same time.Issues regarding female flight attendants tolose weight Considered sexist.


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ADDRESSING EMPLOYEES NEEDS

American Airline ranks top in employee satisfaction.Provides learning and development opportunities to itsemployees.Shares power, responsibility and authority with the employees.Introduced employee suggestion and recognition programs.Motivates employees to present ideas and take initiatives.Rewards its employees for their performance and ideas.Shares a sense of belongingness with employees by sharing theprofits.


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DELEGATING AUTHORITY AND

ENCOURAGING INITIATIVE

American Airline strongly believes in sharing authority with itsemployeesManagers and employees are trained for the responsibilities andauthorities that they have to bear

Employees are not only encouraged to present ideas but they arealso allowed to implement their ideas themselvesPerformance feedback systems are developed by employees. Thisrepresents employees hold to authorityEmployees are also encouraged to take part in important decisionregarding customer satisfaction

Employees have full control over their jobs


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EFFECTS ON PERFORMANCE

Builds employees interest in their jobs and activitiesMotivates and encourages employees to give better performanceIncreased job satisfaction and job securityEmployees are more committed not only to their work but also to

the success of the organizationIncreased interest, hard work and commitment of the employeesleads to improved performance of the organization as a wholeSatisfied employees satisfied customers and higher profits


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RESOLVING FLIGHT ATTENDANTS

PROBLEMS

Crandall should figure out ways in which the flight attendants can bemotivated to agree on losing weightShould reserve some incentives/bonuses (like promotions, pay raise)particularly for those who lose weightCan motivate them by increasing the salaries of the attendants with less

weightShould set some rules or standards and should penalize those who violatethese rulesShould reinforce the need for smart and active flight attendants anddiscourage all othersAttendants that are putting their efforts should be praised and encouraged

Setting attractive rewards can be a motivation for achieving targetsMoreover punishing the rebels can also set examples for other attendants


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W EIGHT RULES: ORGANIZATIONAL

GOALS AND SOCIETAL TRENDS

Airline companies usually prefer selecting those individuals thatare smart and have less weight because of certain rules andregulationsSmart attendants are observed to be more active and physicallyfitThey are liked by the passengers and customers are pleased to beserved by themAre observed to be more witty and intelligentHave a good moraleNow a days there is a trend of sleek and stylish, so customers

expect to see flight attendants that are charming and slim

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American Airlines Case Study 0