Chicago-West Coast Route:

Observations:American airlines’ market share is almost constant throughout the months (July-October)United’s Market Share is increasingContinental’s market share has come down over the periodFull coach passengers are increasing for American Airlines with a CAGR of 4.2%As per the total passengers travelled, the market is shrinkingLoad Factor has come down below break even for American AirlinesFollowing are the service catered by different airlines to different customer segments

Type of passengersTypes of Service Full fare passenger Discounted Fare PassengersNon-Stop service American, United American, United

Connecting service American, United, Continental American, United, Continental

Based on the facts given in the case and the observations above, the following measures can be taken;

1. American should use the data from their SABRE system. From the data, it can be figured out, which route has the highest full fare passenger. Full fare passengers are likely to book tickets just one or two days before the journey. Either they are business persons or flying due to emergency. These people are more concerned about the timing. As United has introduced hourly flights in Chicago to Los Angeles and San Francisco route, it may be assumed that the traffic for business people is higher in these routes. It may be confirmed for the SABRE data based on the full fare passenger data. Based on the findings, American should offer only Non-Stop flights in these routes. From the past data, we can figure out the maximum/minimum demand for Full fare Tickets. Based on the data, the American can offer discounted fare ($177) with restriction based on capacity control to ensure no dilution takes place. By this measure the following can be achieved;

a. Frequency of flight can be increased where traffic of Full fare passenger are more.b. Revenue can be maximized in these routes.c. Direct flights (Chicago- Los Angeles/San Francisco) will reduce fly time, hence less operating

cost.

2. For other route, where the traffic for Full fare passenger is less, a different strategy can be taken. From the trend of market share of Continental (falling trend) it can be assumed that certain passengers travelling in the Chicago-West Coast route are cost sensitive and prefer lower price rather than lower travelling time. American has to increase its load-factor above break even. It has to eat the market of either United or Continental. United has a better frequency of flights. American should concentrate on the market for Discounted Fare Passengers. It should lower down

the discount fare to capture the customers from Continental. Due to better service, America can charge a premium of $10 dollar. The new Discounted Fare should be $169.

New York-San Juan Route:

Observations:Following are the different types of passengers travelling in this route. And each category has different booking characteristics. The following table summarizes those.

Type of Passenger Travelling characteristics Booking characteristicsBusiness Passengers Short notice decision Booking maximum one/two days

before or same day booking, not price sensitive

Caribbean Passengers Short notice decision Booking maximum one/two days before or same day booking, no return plan

Leisure Passengers Long planned decision Long ago planning before the actual journey, return also planned, price sensitive

Based on the above facts we can infer that the Business Passengers and Caribbean Passengers are instant decision maker. So, they are willing to pay the full fare. On the other hand, the Leisure passengers are price sensitive and they are likely to book tickets for return journey also.

So, my recommendations are as following;

a. Offer full coach price to both Business passengers and Caribbean Passengers.b. Discontinue Unrestricted Discount price. The one way unrestricted discount does not make sense

because, both the Business passengers and Caribbean Passengers are instant decision makers, so they will be willing to pay full fare. This one way unrestricted discount fare will lead to dilution.

c. For excursion group, match the price with eastern. Based on the past trend, there should be restriction on capacity control and 7 days advanced booking. It should also include Return trip as it is now.

d. The bucketing should be done as per the Exhibit 5 based on the 7 days prior to departure. e. As a result, there will remain only two booking classes, Y and V. K will be removed.