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American Airlines

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on 17 April 2014

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Transcript of American Airlines

American Airlines
The new American is arriving.
Erica Charles, Danielle Gross, Zachary Katz, Stephanie Li, Akshat Shekar
AA Before Merger: "Legacy Airline"
American Airlines’ merger with US Airways led to congruence among the firm’s inputs and corporate strategy; going forward, American Airlines must integrate stakeholder perspectives to rationalize an unprofitable industry.
How did related horizontal diversification lead to congruence?
AA's Challenging Inputs
Competitive Environment
Threat of Substitutes
Threat of New Entrants
Supplier Power
Buyer Power
Industry Rivalry
10.2 Billion in unfunded pensions
Future replacement of 73% of fleet
Restricting union work rules
Corporate Strategy
Horizontal Related Diversification
Network Efficiencies - 75%
Increased number of routes, airport slots, and planes
Reduction of redundant routes
Higher switching cost for customers

Cost Synergies - 25%
Integration of IT, HR, ticketing, baggage systems
Greater market power vs. unions, suppliers
Benefits of Merger
Significant synergies, achieved quickly

Limitations of Merger
Challenge to integrate workforce and products
How can American Airlines integrate shareholder perspectives?
Differentiation Strategy
American Airlines' support activities
Value the stakeholder
American's premium product

Financial/ Management vs Employees
AA freezes $10B of pension liability
Shareholders offered $11B windfall
“American Airlines couldn’t really achieve its potential because the management-labor relations had gotten so bad.”

- Doug Parker, CEO of American Airlines Group
Adams Equity Theory
Others Rewards and Inputs
Own Rewards and Inputs
Customers as Valued Stakeholders
Decreases between 2008 and 2013
Arrival delays
Departure delays
Flight cancellations
Mishandled bags
Other challenges:
Transferring loyalty program rewards from Star Alliance to OneWorld
Reconciling quality of product
US Airways known for bare-bones vs. AA’s premium service
Balanced Scorecard
Full transcript