American Airlines: Competitors and Five Forces Analysis Term Paper

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Furthermore, while it is true that American recently implemented a refund and $50 voucher guarantee for consumers who find a lower possible fare to their destination, also to keep up with pricing pressure from low-cost carriers, Continental had already implemented such a guarantee first. This may contribute to the industry perception that once-dominant American Airlines is merely playing catch-up with even major carrier rival in terms of consumer incentives and is not offering substantial product innovation and superior customer service. ("American Airlines struggling to hang on to price-shopper market" 2005, Reuters).

According to Michael Porter's Five Forces analysis of market behavior, the airline industry traditionally has had a low threat of entry -- there are numerous regulatory and financial blocks to easy entry and exit of major suppliers. It is harder, in other words, to open up an airline than a new pizza parlor down the block.

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However, with the accessibility of the Internet the power of buyers has increased dramatically in terms of shopping for fares, and the destinations of competitor airlines for international as well as national locations have proliferated. The increased flyer frustration with regulations regarding airline travel has decreased the power of suppliers in the airline industry. In terms of the threat of substitutes, while business travelers who must fly may seem to have fewer options other than air travelers, vacationers can choose to travel by car or by cruise ship, if they are averse to dealing with the hassles of air travel. Even businesses can make use of technology such as the Internet and video conferencing, to reduce costs incurred by the added hassles of flying. Finally, competitive rivalry from others in the industry has skyrocketed with increased fare competition ("Five Forces Analysis," 2000, Marketing Teacher Ltd.)......

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