Air America Harvard Case Solution & Analysis

Air America

Background Information

            Air travel industry is always a rising industry. It contributes in economic growth, world trade, international investment and tourism and it is essential to the globalization that is taking place in many other industries. During the last era, air travel has increased drastically. Both businesses and leisure purpose travel grew globally at a certain pace. Every airline in the world has its own vision like some are focusing on low cost and others facilitate the passengers to provide best quality services by charging high fares.

Governments in developing countries know the benefits of tourism to their national economies and encourage infrastructure and resorts development in order to attract and encourage the tourists from the developed countries. When there is an increase in the economies of the developing countries, so their own citizen’s will be new international tourists for the future. Business travel has also boosted significantly in the last couple of years as the companies are mostly focusing on international travel and invest tremendously to increase the supply, production and customers. The rapid growth in global trade in goods, services and investment have also contributed to the growth in the business travel.

Product Information

Objective of the Air America is to provide affordable and top quality services to the individual and business passengers both within and outside from the United States. Air America aims to cut down the market share of other American Airlines such as Jet Blue, Southwest and Delta Airways. The brand name of the Air America is very attracting and will encourage the passengers to become a part of it. Air America provides different types of services to the passengers for both business and non-business passengers. It offers various discounts and packages to frequent passengers so as to encourage them and it will also help in adding more passengers as well. Air America believes that customers are the king and they are the best marketing tool for bringing more customers. According to research, one satisfied customer shares his good experience with around 10 other customers, which brings more customers in the market without utilizing any marketing or promotion activities. This is one of main reasons why Air America wants to value their customers at a certain level.

Role of International Airline Travelling Association (IATA)

Role of IATA is very significant and vital to the entire airline industry. IATA is an international industry of airline trade groups with a vision to support the airline industry as efficiently as possible at global level. It is situated in more than 150 regions and covers around 101 offices globally. The main purpose of the IATA is to promote secure, regular and economical air travel to the people globally.

Porter Five Forces Analysis

Bargaining Power of Buyer: High

            Passengers are buyers of the airline industry, while travelling buyers are usually Economy Class passengers or Business Class passengers. Customers travel globally according to their buying power and need. Currently, there are numerous airlines available to the passengers to approach, and they can choose as per their buying power and interest. Bargaining power of the buyer is on the higher side because they have sufficient options available to travel as per their priorities. It is up to the passenger whether to choose an airline with high fares and top quality or to travel in a low class travel to meet the objective. Normally, fares in the travelling industry are high but some travelling companies are also facilitating passengers by charging low fares. Air America will also utilize this force in a positive manner; hence, it will attract passengers by charging low fares and providing best quality services (Jeffrey, 2007)

It is a great opportunity for Air America to operate globally to gain competitive advantage over other competitors.

Bargaining Power of Supplier: High

            Airplane manufactures are the suppliers of the airline industry, top two airline manufactures of the world are Boeing and Airbus; both of them belongs to the United States. There is an enormous amount of risk element because standards should be met in order to manufacture aeroplanes. Both of the suppliers have their significance and brand image globally so they charged according to their will; as a result they can bargain as much as they can. But one thing is sure, they cannot compromise on the quality standards due to their professional approach and brand image. “Eco-Friendly Planes” are also causing a major change in the bargaining power of suppliers. Frequently, airline companies do not switch suppliers due to long-term contracts because planes are very expensive capital products and organizations usually have long-term loan agreements with other companies. It is not very easy to manufacture planes as one aeroplane estimated cost is approximately 200 million dollars that is one of the major reasons that there are extremely few aero plane manufacturers in the airline industry. Air America also needs to overcome and effectively manage this factor in a positive way so that its business does not suffer from it (Janna 2013).................

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