The COVID-19 pandemic has so far been the largest exogenous shock that the global aviation industry has ever had to face. The aviation industry is part of the interconnected global economy and, before the world came to a standstill in 2020, had been the fastest-growing transportation sector. In 2020, commercial airlines around the world carried only 1.8 billion passengers and brought $328 billion in global revenue (Mazareanu). Compared to the pre-COVID-19 times, these figures indicate a certain decline in the aviation industry. In particular, Mazareanu notes that in 2019, 4.5 billion passengers worldwide chose air travel, which translated into almost $838 billion in revenue.
Though it is estimated that in 2021, the aviation industry might do somewhat better, it is unlikely that it will fully recover. For instance, the IATA’s most current data insights regarding the US aviation industry paint a grim picture. In particular, the IATA reports that in January 2021, the total demand was 72% less than in January 2019. Even domestic travel has been heavily impacted by the virus outbreak: comparing January 2021 and January 2019, the demand for domestic flights is down 47.4% (IATA).
The market dynamics are projected to prevent US airlines from making enough profit to sustain themselves. According to IATA, it is quite the opposite: the US aviation industry will spend an additional $75-95 billion in cash in 2021 and will hardly survive without government support. Besides, boosting testing capability and making vaccinations more available will play a key role in helping the aviation market recover.
Despite the ongoing pandemic, American Airlines do not lose its leading position in the American market. Among its main competitors are Delta, United, Alaska, Frontier, JetBlue, and Southwest. American Airlines employs more people than any other US airline. In 2021, its workforce amounted to 128,000 people, whereas the only two airlines with a comparable number of workers are Delta (82,564) and United (92,000) (Owler).
Moreover, American Airlines has the highest revenue out of the entire set of competing US aviation market players. In 2021, its revenue was estimated at $17.3 billion (Owler). Delta comes close second with a revenue of $17.1 billion, and United, which generated $15.4 billion, comes third (Owler). One metric per which American Airlines is not leading is the amount of funding (Owler). The last round of funding brought American Airlines $2 billion, while its competitor Delta received $3 billion.
The question arises as to how American Airlines and its competitors are handling the COVID-19 pandemic and what factors determine their survivability and competitiveness. KPMG argues that the current crisis is different from other crises that North American carriers faced in the past. First and foremost, American Airlines and other airlines entered the critical stage due to the outbreak in a strong financial state due to the market consolidation following the latest financial crisis. KPMG opines that during the pandemic, balance sheets, route networks, and liquidity have become key competitive advantages. It is said that airlines with strong management teams will pave their path to recovery when the outbreak subdues and is effectively contained.
It is compelling to take a look at how exactly American Airlines have been realizing its COVID-19 strategy and increasing its competitiveness. The point of parity in American Airlines’ recovery strategy is the transparency of information regarding anti-COVID-19 measures. These days, all major airlines are informing the public about how much they care about passengers’ health and safety. For instance, American Airlines clarified the process of disinfecting planes and making sure that staff is healthy and not affected by the virus.
Another pattern that stands out immediately is the corporation’s choice not to fight the competitors but to enter partnerships with them. For instance, in January 2021, JetBlue and American Airlines announced their strategic alliance making progress after positive feedback from the Department of Transportation (DOT) (American Airlines Newsroom). The two carriers unite their forces to deliver the best possible experience to customers in the Northeast who might have felt somewhat underserved (American Airlines Newsroom). Each airline hopes to use this relationship in its favor and direct the joint resources toward the soonest recovery.
American Airlines is working not only making domestic flights more comfortable but also to make international travel a possibility. The company is keeping itself up to date with the COVID-19 pandemic dynamics and working relentlessly to accommodate its clients. For instance, four weeks ago, it has been announced that American Airlines worked closely with Italian authorities to launch quarantine-free flights from New York to Rome and Milan (“American Introduces More Quarantine-Free Travel”).
Previously, travelers from the USA would have to self-isolate upon arrival (“American Introduces More Quarantine-Free Travel”). However, American Airlines facilitated the process by finding a compromise with the Italian government. Now Italy only requires two negative PCR tests to permit entry and stay. To conclude, American Airlines’ competitive strategy is threefold: transparency regarding health and safety measures, strategic alliances with direct competitors, and collaboration with external agents.
American Airlines Newsroom. JetBlue and American Airlines Advance Strategic Alliance Following Regulatory Review. 2021. Web.
IATA. 2021 Passenger Traffic off to a Poor Start. 2021. Web.
KPMG. The Aviation Industry Leaders Report 2021. 2021. Web.
Mazareanu, E. Air Transportation – Statistics & Facts. 2021. Web.
Owler. American Airlines Competitors. 2021. Web.