The Survival of American Airlines

Paper Summary:

This paper takes a brief look at what characterizes American Airlines and the tactics they will have to employ if they hope to survive their current economic situation. This paper also takes a look at the reluctance of Americans to fly as a result of 9/11 and other terror attacks.

From the Paper:

"The airline industry is characterized by very complex pricing dynamics, depending on travel distance, type of traveler, and domestic and international flights, to name a few of the many factors that determine the degree of price elasticity or inelasticity (Air travel demand elasticities: Concepts, issues and measurement). For long-haul international business travel, demand is not sensitive to fare changes because there are few close substitutes. On the other hand, long-haul domestic business travelers have much higher elasticities than international business travelers. Telecommunications has become more acceptable as a substitute in domestic markets due to common culture, laws, contracts, etc. Likewise, international leisure travelers have greater elasticity than do international business travelers. These consumers are more likely to either postpone their trips in response to higher fares or seek locations that are not as expensive. "

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