Business model of American Airlines

Customer Segments

American Airlines serves a variety of customers with its range of air travel services. The Company principally serves general consumers, providing air travel to individuals, families, groups and professionals. The Company also serves corporate customers, providing full-service business travel to companies from small local or regional companies to large multinational enterprises.

American Airlines also serves a range of commercial clients, as well as general consumers, with cargo and air freight services, transporting live animals, perishables, dangerous goods and valuable cargo to a network of cargo facilities across major cities in the US, Europe, Canada, Mexico, the Caribbean, Latin America and Asia.

American Airlines primarily serves customers in the US, where it has network of domestic services. The Company also serves international customers across destinations in 49 countries, divided in the following regions: Latin America, Atlantic, and Pacific.

Value Propositions

American Airlines provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as one of the leading US carriers both domestically and internationally, having a proven track record for reliable and quality services;
• Its customer service, with the Company cooperating with its customers with regard to customer issues, cancellations and booking management, as well as providing in-person care during flights;
• Its network of international and domestic services, with the Company serving an extensive range of popular domestic and international destinations;
• Its frequent flyer rewards program, with the Company collaborating with commercial partners to provide discounts and rewards to its frequent flyer customers;
• Its full-service business travel programs, with the Company providing corporate travel services, including the management hotels and ongoing transport bookings; and
• Its flexibility and accessibility, with the Company utilising mobile applications to provide notifications and flight information to its customers.

Channels

American Airlines operates a website at www.aa.com, through which it provides information on its operations, destinations and travel extras. The Company also operates a booking portal on its website, through which customers can make flight, connecting transport and hotel reservations, as well as through regional and country-specific website such as www.americanairlines.ie. The Company also operates physical reservation centres and makes sales through a direct sales force that is contactable over the phone.

American Airlines also makes sales through a range of third parties and affiliates. This includes global distribution systems such as Amadeus, Sabre and Travelport, traditional brick and mortar travel agencies, and online travel agents such as Expedia, Orbitz and Travelocity. The Company also makes sales through its network of partner airlines.

Customer Relationships

American Airlines makes a significant portion of its sales on a self-service basis through its own online booking portal, which allows customers to purchase flight tickets, make hotel bookings and organise connecting travel without interacting with members of the American Airlines sales force.

Customers can access a more personalised sales service over the phone and through its physical reservation centres, with customers able to consult sales staff directly and receive more tailored assistance. Customers can also contact the Company directly with after-sales enquiries, complaints and requests, either over the phone or via email. American Airlines also provides a range of online support resources such as FAQs and guides.

American Airlines operates several social media accounts, including with Facebook, Twitter and YouTube, through which it can interact directly with the Company.

Key Activities

American Airlines Group Inc. (AAG) is a holding company whose primary business activity is the operation of a network air carrier through its subsidiaries, American Airlines, Inc. (American) and its regional subsidiaries, Envoy Aviation Group Inc. (Envoy), Piedmont Airlines, Inc. (Piedmont) and PSA Airlines, Inc. (PSA). The Company has hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York City, Philadelphia, Phoenix and Washington, D.C. Together with its regional airline subsidiaries and third-party regional carriers operating as American Eagle, the Company's airline operates an average of approximately 6,700 flights per day to over 350 destinations in approximately 50 countries.

The Company operates approximately 940 mainline aircraft and is supported by its regional airline subsidiaries and third-party regional carriers, which operates an additional 587 regional aircraft.

Key Partners

American Airlines collaborates with various companies in the provision of its services. These partners can broadly be categorised as:

• Airline Partners, comprising international and domestic air carriers and operators that supplement the Company’s own services and increase the ease with which customers can find interconnecting flights;
• Rewards Scheme Partners, comprising a range of commercial entities that provide discounts and products to the Company’s regular customers; and
• Distribution and Sales Partners, comprising partner travel agencies, distribution systems and online travel retailers that extend the Company’s marketing and sales reach.

As a member of the One World Alliance, American Airlines partners with a number of airlines such as Qantas, Malaysia Airlines, Iberia, Cathay Pacific, British Airways, and Royal Jordanian.

Key Resources

American Airlines’s key resources are its fleet of aircraft, its physical infrastructure and ground facilities, its sales and distribution channels, its supply chain – notably its supply of fuel, its airline partners, and its personnel.

As of 31^st December 2015, American Airlines operated a mainline fleet of 946 aircraft, comprising Airbus, Boeing, Embraer, and McDonnel Douglas planes, and a regional fleet of 586 aircraft, comprising Bombardier, De Havilland Dash, Embraer, and Saab planes.

Searches of records published by the US Patent and Trademark Office identified several patent applications filed in the name of American Airlines, including applications entitled ‘System and method for providing goods, services or information using scannable code’, ‘Portable cylinder assembly torque tool’ and ‘System and method for managing instances of damage within a transportation system’

Cost Structure

American Airlines incurs costs in relation to the purchase and maintenance of its aircraft, the operation and maintenance of its physical infrastructure and ground equipment, the purchase of supplies – most notably fuel, the operation of its various sales and distribution channels, the management of its partnerships, and the retention of its personnel.

In 2015 American Airlines accrued costs related to the payment of salaries, wages and benefits to tits international workforce in the amount of $9.52 billion. The Company also accrues substantial mainline and regional fuel expenses, which totalled $7.5 billion in 2015.

Revenue Streams

American Airlines generates revenue through the provision of air travel and related services. This includes revenue derived from the sale of air fares, the provision of corporate travel services, and the provision of domestic and international freight and cargo services, as well as the sale of additional extras such as insurance and in-flight services.

In 2015 American Airlines generated $40.99 billion in annual operating revenue, down slightly on the $42.65 billion in revenue recorded by the Company in 2014. Mainline and regional passenger revenues totalled $35.5 billion, a decrease of $1.6 billion, or 4.3%, compared to 2014. This decline in revenue was attributed to competitive growth in certain domestic markets.