AA should look at BA's business model

 
Old Jun 5, 05, 7:02 am
  #1  
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AA should look at BA's business model

AA should look at the BA model and follow their lead to profitability ... BA focuses on the business traveler and gets them to fly BA because of their superior F/P and J/C product. AA has continued to downgrade their premium service and I they are continue to lose their loyal business travelers.

Look at what's happened to the trans-Atlantic market - Who would want to fly AA in First of Business when there are so many other superior alternatives. If they don't react quickly on the domestic markets they are going to lose that business traveler too. Song and Jet Blue are looking more and more attractive with superior service and product.

BA's got it right - the road to profitability is thru their loyal premium passengers and their bottom line proves it with a strong profit.

Wake up AA!
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Old Jun 5, 05, 7:33 am
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While I agree with you on most levels I can't help but think AA has one of the strongest followings of business customers in the world - a lot of Fortune 500 companies use American as their primary airline for employees. I'm sure AA will continue to fill up the business class seats with business customers who are restricted to fly AA because of company policy.

But BA certainly does look to be on the way to profitability.
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Old Jun 5, 05, 8:23 am
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Originally Posted by JohnMD
While I agree with you on most levels I can't help but think AA has one of the strongest followings of business customers in the world - a lot of Fortune 500 companies use American as their primary airline for employees. I'm sure AA will continue to fill up the business class seats with business customers who are restricted to fly AA because of company policy.

But BA certainly does look to be on the way to profitability.
AA has mainly legacy corporate accounts lock-in which has kept AA alive in its premium travel business. AA is your father's oldsmobile for the old world companies (and media companies). Their current product will not attract new world companies (which is not necessarily that big a problem now as the tech boom collapsed). But if the cycle brings up many new companies, AA will not be the carrier of choice. CO did very well in this regard stealing many of the new world companies with their new image marketing but they have their own problems.

While BA may have superior products, it is difficult for them to get US corporate contracts. If US didn't have a protective market for its own airlines domestically, BA may very well have tried to cherry-pick domestic routes and would have been well-poised to grab a good market share of the US corporate markets. Right now, they get premium business from US corporations that do not have coprorate contracts or where the top management can fly any airline they want. BA also has an advantage if you want to fly to destinations beyond UK. If US protectionism for domestic travel against foreign airlines or foreign ownership were to be removed, BA would be in your face all over the US and have the financial strength to do it. OW (and perhaps even AA) would be history. This is not necessarily good for the consumer, of course.

BA also has the right business model inside Europe because of the LCC competition. While they were as bad as AA in extortion fares earlier, they has to come to their senses and introduce their own version of SimpliFares (no sat night restrictions, etc) long before the US airlines were forced to.

Of course, BA is not as "generous" as AA for FFers unless you fly premium classes but that is a correlation not a causal factor of a good business model.

I do agree that BA has a good business model although I am not at all fond of their coach product and their frequent delays (at least in my experience) for intra-europe travel (a zillion sorry's from the cockpit is very often more annoying than the delay itself).
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Old Jun 5, 05, 8:52 am
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BA intra Europe business traveller pays J, travels J - pays Y, travels Y ... can you say the same for AA?

Now there's a business model to follow...
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Old Jun 5, 05, 9:03 am
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Originally Posted by MikeTucson
AA should look at the BA model and follow their lead to profitability ... BA focuses on the business traveler and gets them to fly BA because of their superior F/P and J/C product. AA has continued to downgrade their premium service and I they are continue to lose their loyal business travelers.

Look at what's happened to the trans-Atlantic market - Who would want to fly AA in First of Business when there are so many other superior alternatives. If they don't react quickly on the domestic markets they are going to lose that business traveler too. Song and Jet Blue are looking more and more attractive with superior service and product.

BA's got it right - the road to profitability is thru their loyal premium passengers and their bottom line proves it with a strong profit.

Wake up AA!
BA are not on the road to profitability, they are the most profitable airline in the world.
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Old Jun 5, 05, 10:05 am
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Trying to implement the BA model in the American market will drive many people who pay a for range of fare classes off to other carriers or simply make their decision based upon price.

Delta tried this foolish experiment 2 years ago and got their fingers burned quite badly when many former loyal elites stopped flying them. And deservedly so!

AA could stand to gain by improving their premium products, but catering only to the premium fare paying passenger will hurt AA more than help them.
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Old Jun 5, 05, 12:18 pm
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Originally Posted by MikeTucson
AA should look at the BA model and follow their lead to profitability ... BA focuses on the business traveler and gets them to fly BA because of their superior F/P and J/C product. AA has continued to downgrade their premium service and I they are continue to lose their loyal business travelers.

Look at what's happened to the trans-Atlantic market - Who would want to fly AA in First of Business when there are so many other superior alternatives. If they don't react quickly on the domestic markets they are going to lose that business traveler too. Song and Jet Blue are looking more and more attractive with superior service and product.

BA's got it right - the road to profitability is thru their loyal premium passengers and their bottom line proves it with a strong profit.

Wake up AA!
EXCELLENT idea!

First, we'll need to develop one airport that handles an majority of all US international air travel.

Second, we'll need to make this airport a fortress hub for American....
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Old Jun 5, 05, 12:21 pm
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I'd say it won't work for a variety of reasons simplified as follows.

BA is very dependent on (premium) O&D traffic to its primary (and only) hub (read LHR). It can offer British/London-originating traffic (a large market) direct/non-stop service to many destinations of economic significance from one hub (something which must be attractive).

BA can choose to focus on its LH (international extra-European) and SH (domestic/intra-European) markets as too very seperate offerings. It doesn't have to have the SH market to feed into the LH market as AA has to do in a large extent. That's why BA lost the "world's favorite airline" tag as its transfer market has shrunk (LH can claim that now).

AA has too many frequent customers spread around the U.S. and has to transfer them.

I won't even talk about the product and fares.
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Old Jun 5, 05, 12:25 pm
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I suppose BA and AA have the two different business models (As I can see) for airlines. AA seems to be all about getting the upgrades. So, as it would seem to me, people who fly on BA, usually expects to fly in the class for which they've bought a ticket. In AA, everyone is waiting for their upgrade. You cannot compare the AA J class product with BA.No flat bed. And that's why I think Ba is doing so well. Most people the premium classes have paid to be in the class they are flying in. Let's be honest, if you had the choice to fly club class and you could choose BA or AA, which airline would you choose?
Does the American government still have a 'fly American' policy? This would account for alot US business
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Old Jun 5, 05, 12:26 pm
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Originally Posted by blueeyes_austin
EXCELLENT idea!

First, we'll need to develop one airport that handles an majority of all US international air travel.

Second, we'll need to make this airport a fortress hub for American....
Excellent post!
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Old Jun 5, 05, 12:29 pm
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AA's doemstic first class is much better than BA's European front cabin. If AA upgraded their international F and J cabins to BA levels and lowered their domestic F cabins to BA's level, what would happen?
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Old Jun 5, 05, 1:02 pm
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Originally Posted by Tango
AA's doemstic first class is much better than BA's European front cabin. If AA upgraded their international F and J cabins to BA levels and lowered their domestic F cabins to BA's level, what would happen?
1) no one would pay for a business class fare domestically.
2) they would lose the loyalty of a lot of passengers who pay for coach but keep flying AA because of the ability to upgrade - BAs domestic-equivalent F is a lot worse in my opinion than typical AA coach, so let's assume it would be the same as flying AA in coach with a guaranteed free middle seat and some food. I think many travellers would pick LCCs like B6 with direcTV instead. The only exception might eb those that fly mainly international, and use US flights occasionally to round out their qualification to EXP - since now those VIPs would be worth more, assuming you could actually snag the upgrade.
3) in return, they would probably snap up a larger portion of the paid premium international market. Certainly they would get a nice chunk of passengers away from other US airlines: UA, CO, etc. I'm not sure we'd see premium passengers from the european airlines suddenly prefering AA, however, since they are already well-established within those airlines programs.

Would this overall make AA more money? It's unclear to me. Most of AA's business is intra-US. They may be focusing more on international as a money-making segment now, but a move like you describe would basically mean capitulation and loss of a good portion of the US market.
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Old Jun 5, 05, 1:32 pm
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[QUOTE=wannabe]1) BAs domestic-equivalent F is a lot worse in my opinion than typical AA coach, [Quote]

This is simply not true! In Club Europe you get a big meal (depending on length of flight etc) and free champagne. You get NEITHER in AA domestic coach. How can you possibly justify such a statement?
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Old Jun 5, 05, 2:23 pm
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Originally Posted by ramraideruk
Does the American government still have a 'fly American' policy? This would account for alot US business
The policy basically requires you to fly on a US carrier's flight numbers (assuming that some US carrier serves your origin/destination). Codeshares are permitted as long as they are booked under the US carrier flight number. The policy applies to all federal $$$, including contractors and grant recipients.
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Old Jun 5, 05, 3:08 pm
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One of the reasons that AA's product may compare unfavorably to BA's in F and J is that AA discounts heavily in the forward cabins. Although independent travelers and small business employees (which include many FT members) have to pay full list, the Fortune 500, etc. get the product at vastly reduced rates.

Paying the published tariff for int'l AA product in F and J is a sucker's bet for retail customers.
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