University of Technology, Jamaica – Strategic Information Systems

American Airlines Vs Southwest AirlinesClass Activity 1: Strategic Information Systems

Student Name

Jan 21, 2017

Airline Industry

Since the birth of flight in 1903, air travel has emerged as a crucial means of transportation for

people and products. The hundred-plus years following the invention of the first aircraft have

brought about a revolution in the way people travel. The airline business is a major industry,

relied upon by millions not only for transportation but also as a way of making a living.

Early 20th Century

Airplanes were around the first few years of the 20th century, but flying was a risky endeavor not

commonplace until 1925. In this year, the Air Mail Act facilitated the development of the airline

industry by allowing the postmaster to contract with private airlines to deliver mail. Shortly

thereafter, the Air Commerce Act gave the Secretary of Commerce power to establish airways,

certify aircraft, license pilots, and issue and enforce air traffic regulations. The first commercial

airlines included Pan American, Western Air Express and Ford Transport Service. Within 10

years, many modern-day airlines, such as United and American, had emerged as major players.

American Airlines Company Profile

• Founded: April 15, 1926

• Merged with U.S Airways & American Eagle December 9, 2013

• Commenced operation June 25, 1936

• Headquarters Forth Worth Texas U.S.

• Key people: Doug Parker (Chairman & CEO) Robert Isom (President)

• Hubs: 5

• Fleet size 931

• Destinations 350

• Slogan: "The World's Greatest Flyers Fly American“

Southwest Airlines Company Profile

• Founded: March 16, 1967

• Commenced operation June 18, 1971

• Headquarter Dallas Texas U.S

• Fleet size 723

• Destinations 101

• Slogan: “Low fares, Nothing to Hide

• Key people: Gary C. Kelly – chairman, Tom Nealon – president, Mike Van de –

chief Operating officer

• Hubs 10

• Website: www.southwest.com

Share Price Information

Domestic market share of leading U.S. airlines between February 2015 and January 2016

Fig 1: https://www.statista.com/statistics/250577/domestic-market-share-of-leading-us-airlines/

Share Price Information

Domestic market share of leading U.S. airlines between November 2015 and October 2016

Fig 2

Share Price Information – Cont’d

American Airlines Income Statement

Fig 3

http://finance.yahoo.com/quote/LUV/financials?p=LUV

Share Price Information – Cont’d

Southwest Airlines Income statement

Fig 4

http://finance.yahoo.com/quote/AAL/financials?p=AAL

Share Price Information – Cont’d

AA Future Share Price Growth Southwest Future Share Price Growth

Fig 5a - money.cnn.com Fig 5b - money.cnn.com

Analysis Using IS Planning Techniques

Four IS planning tools used:

• Critical Success Factors

• Five Forces Model

• SWOT Analysis

• Value Chain Analysis

Critical Success Factors

American Airline:

• Strong Management team

• Capable workforce

• Service promotions and in-flight

service

• Efficient management of cost

Southwest Airlines:

• Hire great people and treat them

like family

• Care for the customer warmly

• Keep fares and operating cost

lower than competitor

• Prepare for bad times with

strong financial strategy

Porters Five Forces Analysis

Competitive ForcesAmerican Airline

Strength of Force

Southwest Airlines

Strength of Force

Supplier Power High High

Buyer Power High High

Threat of Substitute Moderate Moderate

Competitive Rivalry High High

Threat of new entrants Low Low

American Airlines - SWOT Analysis

Strength – internal positive factors Weaknesses - internal negative factors

• Merger with U.S Airlines

• Strong Hub in Dallas/Fort Worth

• Advantage recognized as the best customer loyalty

program

• Strong Brand image, Started many new routes since

2010

• Strong image for onboard entertainment content

• Wide reach with over 250 destinations with a strong

fleet size of 600 carriers

• Financial position is a cause for concern

• Losing out market share to LCCs and other

competitive players

Opportunities - external positive factors Threats - external negative factors

• Leverage on code share agreement with a number of

airlines

• Capitalization on growth of HDTV

• More international destinations on popular routes

• Increasing Fuel Costs and Increasing Labor Costs

• Pressure from regulation bodies and Gov policies

• Low fare service providers

Southwest Airlines SWOT Analysis

Strength – internal positive factors Weaknesses - internal negative factors

• Low-cost, efficient operations equates to low

fares/great value

• Employees are allowed/encouraged to have and show

their sense of humor

• More departures than any other US airline

• High capacity usage (few unfilled seats)

• No flights to international destinations

• Dependent on a single type of aircraft - the Boeing

737

• Booking flights is not available except directly

through Southwest Airlines

• Few morning flights offered

Opportunities - external positive factors Threats - external negative factors

• International markets are not yet served by Southwest

• Longer flights are a growing market

• New plane technology, will increase air travel

• New technology - opportunities for new services and

products

• Fuel price increases could reduce air travel

• Decline of leisure travel due to terrorism and/or a

depressed economy

• Increased competition would likely hurt industry

profitability

Airline Industry Value Chain Analysis

Fig 9: Adapted with permission from Surenderan E,

Research Manager at IMRB International

Competitive Advantage: IS Strategies

Purpose:Because Sabre is the platform

currently being used at American

Airlines, it should minimize

disruption for the maximum number

of people and systems by bolstering

employee readiness, speeding up

implementation and improving

customer responsiveness throughout

the integration.

Customer Relationship Management:

American Airlines selects Sabre reservations system

Benefits of using Sabre:• Assist in processing 85,000 daily telephone

calls, 30,000 daily requests for fare

quotations 40,000 daily passenger

reservations, 30,000 daily queries to and

from other airlines, and 20,000 daily ticket

sales.

All of this processing for most individual

interrogations will be handled in less than

three seconds.

Competitive Advantage: IS Strategies

Purpose:

To move some of its applications to the

cloud and make use of IBM infrastructure

as a service and platform as a service

tools.

American Airlines Application and Data Management System

Benefit:

• Greater enterprise flexibility, scalability and

reliability

• Take advantage of IBMs storage capacity and

technical expertise

• AA will have access to IBM advanced analytics

capabilities and technologies

• Allows American airline to advance its

enterprise into a cognitive infrastructure that

offers greater resiliency and better customer

experiences

Competitive Advantage: IS Strategies

Customer Relationship Management:

AA signed a strategic technology agreement with Lenovo

Purpose:

• AA aims to create the

ultimate business experience

for its customers who need to

access the home or office

while traveling.

Benefits:

• To giving business travelers

access to top-flight PCs and

workstyle/lifestyle services

in a setting that fosters

comfort, convenience and

personal productivity.

Competitive Advantage: IS Strategies

Customer Relationship Management

Southwest Airlines Uses Big Data To Deliver Excellent Customer Service

Purpose:

To deliver the highest

quality of customer service.

Benefits:

• This allows Southwest Airlines to provide

even better customer service using more data

analysis.

• Deliver Southwest Airlines more information

on what the customers are looking for and

how their experience with Southwest Airlines

is.

Competitive Advantage: IS Strategies

Purpose:

So Southwest can virtualize their

physical servers and run apps on

clouds instead of desktops.

VMware Technology: Provides virtualization software to Southwest

Benefit of using VMware virtualization:

Easily integrate into southwest infrastructure

Provide top performance and scale to expand

to expand the company’s IT objectives

Roll out new employee tools

Launch a new platform and provide a quick

transition of operation

Cut cost, increase data volume, manage

Virtualization at Southwest Airlines

7-21

THE END