American Airlines Case

American Airlines is faced with the decision of how to maximize its revenue and maintain and improve its revenue management strategy over the coming years in the face of growing domestic and international competition. Primarily, American Airlines must determine which initiative to implement that will support the five existing teams of American's revenue management organization, increasing their competitiveness through efficiency and effectiveness. Since the 1978 Airline Deregulation Act, American Airlines has successfully developed and maintained demand, capacity and yield management systems allowing American to remain the largest airline in the United States, leader in the use of analytical tools and operating one of the most extensive route systems in the USA. Unfortunately, American lacks a price, service and competitive environment demand model that can automate rote-pricing decisions based off reactions to competitor pricing initiatives, avoiding response based pricing such as the Chicago-West Coast and New-York-San Juan situations. In addition, American could experience additional benefits through the use of contribution-based yield management at the level of Origin and Destination markets rather than primarily focusing on flight legs. Finally there lacks sufficient integration of decision support systems which often calls for manual adjustments in indexing and allocation level optimization to build in market factors and unexpected capacity constraints.

After thorough evaluation of the options available to the Pricing and Yield Management Systems Development team and American, it is determined that the company requires the integration of its decision support systems. Currently American successfully balances maximizing revenue contributions while achieving basic feasibility. Although, there exists the opportunity for American to maintain its large presence in the airline industry and improve its profitability over the future by integrating improvement strategies across each of the three facets of revenue management. This can be best achieved through the integration of a decision support system for pricing and yield management and schedules.

To ensure successful implementation, American must map out a strategy, ensure Senior Management support and develop performance objectives. Initially, American should form a cross-functional team to include the Pricing and Yield Management System Development team to evaluate the current decision systems in place. Information must be captured for implementation into the new integrated system and an overall support system design blueprint must be finalized. Next, the integrated decision support system must be tested and validated before focused implementation throughout the entire revenue management organization. Lastly, American must avoid alienating customers, maintain its high employee morale, manage the change and reward structure surrounding the decision support system and conduct

...