Marketing Plan: American Airlines Executive Jets

Running Head: MARKETING PLAN: AMERICNA AIRLINES EXECUTIVE JET

Marketing Plan: American Airlines Executive Jets Jeremy Paul Stephens Embry-Riddle Aeronautical University

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET Executive Summary

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET Situation Analysis American Airlines was initially founded as American Airways Inc. by the consolidation of more than 80 small airlines in 1930, and subsequently were renamed American Airlines Inc. in 1934 (History of AMR Corporation and American Airlines, 2011). American Airlines was able to maintain its status as an industry leading airline, throughout its 70 plus year history. However the events of September 11, 2001, antiquated pre-regulation labor agreements, and the global recession of the late 2000’s proved too much, and American Airlines eventually declared bankruptcy in November of 2011, the last of all legacy airlines to do so. According to Thomas W. Horton, then CEO of AMR Corporation, the parent company for American Airlines, filing bankruptcy allowed the airline to restructure vast amounts of debt, and lower its labor costs. This move would “restore the company’s profitability, operating flexibility, and financial strength,” (De La Merced, 2011). In December 2013, as AMR Corporation exited bankruptcy, AMR and US Airways Group officially announced a $17 billion merger. The new American Airlines Group now has over 100,000 employees, nearly 6,700 daily flights to over 330 destinations in over 50 countries, and is the largest airline in the world (Karp, 2013) (Stephens, 2014). American Airlines Group’s second quarter 2014 non-GAAP net profit excluding net special charges was $1.5 billion, with a net profit after special charges of $864 million (American Airlines Group, 2014). American Airlines Group expects net profits for the year to exceed $6 billion, or $3.2 billion after special charges. American Airlines is dedicated to serving current and future customers by continuing to build on its overall network of 330 destinations. American see growth opportunities in destinations in South America, and especially the Asia-Pacific region. American has bolstered its service in Asia by adding flights to and from Shanghai and Hong Kong via Dallas-Fort

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET Worth, Chicago, and Los Angeles. American continues to see this as a growth opportunity and has requested adding Beijing to its list of destinations from Dallas-Fort Worth (Ahles, 2014). American has also requested that the U.S. government award a slot at Tokyo-Haneda from Delta as it could make better use of year round service from Los Angeles than Delta’s seasonal service from Seattle-Tacoma (Schlangenstein, 2014). In assessing various opportunities for network growth enhancement, both domestically and internationally, American has recognized the opportunity to bolster growth, and provide a new type of service to meet our most travel dependent customers’ needs. American Airlines Executive Jets will provide executive service to clients aboard private jets that meet the customer’s needs, and either feed into the existing network, or offer direct charter service between points chosen by the customer. Adding private executive aircraft to the total American Airlines fleet effectively adds 5,000 destinations to the network via the use of general aviation (GA) or noncommercial airports (Charter & other nonscheduled air transportation services quarterly update 8/25/2014, 2014). American is dedicated to offering customers a broad range of options to meet their travel needs, while still being an industry leader in environmental programs as well as giving back to the community. American Airlines Executive Jets will enhance American Airlines Groups community outreach including honor flights, Skyball, mAAgic flight, and Snowball Express. American Airlines Executive Jets will also include a comprehensive carbon offset program that will help to address concerns of the new subsidiary’s environmental impact and establish measures to continually reduce or exponentially offset its carbon footprint (NetJets Announces Comprehensive Climate Initiative, 2005).

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET Potential customers of American Airlines Executive Jets are hard-working, and desire to do everything possible to capitalize on the one commodity that can never be banked or stored: time. While the target customers may have money to spend, they still want value, flexibility, and to see the personal benefit for their purchase. These customers will include mid to upper level professionals, executives, high net-worth individuals, even sports teams, as well as the US military, and government agencies. The main competitors of American Airlines Executive Jets are Delta Private Jets, and NetJets. Delta Private Jets is a wholly owned subsidiary of Delta Airlines, and provides travel services for customers who are seeking charter services and do not mind paying a premium for the service. Delta targets these customers through primarily print ads in affluent publications, as well as at events and locations that the target audience is likely to attend or visit. Delta Private Jets also offer jet management and technical operations for jet owners. The primary strength of Delta Private Jets is the financial backing and reputation of the parent company Delta Airlines. It is also worth noting that Delta Private Jets consistently achieves the highest safety rating in the industry. Their primary weakness is that they have a small fleet size, and thus a small market share. Delta Private Jet’s biggest op[opportunities lie in expanding its fleet in order to expand market share especially in growing regions such as Latin America and Asia Pacific. Delta’s threats are a result of their size, they are smaller than their direct competition in the market, and the large cost and volatility of fuel wreak havoc in the charter jet market (Brown, 2011; Delta Private Jets, 2014). NetJets is a jet card, charter jet, and fractional ownership executive jet company based out of Columbus, Ohio, and is owned by Berkshire Hathaway. NetJets is the largest executive jet company in the industry, with over 800 aircraft spread across more than 15 airframe types.

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET NetJets serves the entire world with over 300,000 flights a year through their three divisions NetJets US, NetJets Europe, and NetJets China. Like Delta Private Jets, NetJets provides travel services for customers who are seeking charter services and do not mind paying a premium; however they offer it through different means. The customer can buy time through a jet card which is used on any jet, or they may lease a specific amount of time on a specific jet, or a customer can own a specific amount of time on a specific jet each year through the fractional ownership of the jet. NetJets’ biggest strength comes from the fact that they are the company that invented fractional ownership. They have been doing it the longest and control approximately 60 percent of the market. They are also owned by Berkshire Hathaway and have the financial backing and security that comes along with their image and ability to expend large amounts of capital. Their main weakness is that they are the most expensive company in the industry and have very high operating costs, this is partially due to their extensive fleet diversity which drives up maintenance and operating costs. Their opportunities lie in their established relationships with vendors and suppliers, as well as airports, as they have been around for a while. They also have the opportunity to easily compete in a new market as the capital is readily available to immediately invest. NetJets’ main threats are similar to that off any air service company, the volatility in the fuel market, as well as business slowdowns during economic downturns (NetJets, 2014). The external market for charter jet and jet card service is favorable and growing. Market analysts predict that the market will grow at a compounded rate of over 4 percent each year between now and the end of 2018, the latest year for which market predictions are available. American Airlines Executive Jets plans to not only tap into that market growth, but also to take advantage of current customers who fall within the target profile. While the price of fuel will

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET most likely continue to rise, this will be offset by the brand new and fuel efficient fleet possessed by American Airlines Executive Jets (Charter, 2014). American Airlines Executive Jets’ strength comes from two main sources. The first is the solid economic standing of the parent company American Airlines Group, with the current profits realized from the bankruptcy emergence, as well as the recent merger, American Airlines Executive Jets is poised to enter the market with a small debt load and reasonable operating costs. Any startup losses will be able to be easily offset or absorbed by the parent company for the foreseeable future until a market foothold can be established. The secondary strength lies in the strength of the parent company’s already extensive network. American Airlines Executive Jets will be able to feed into and from this extensive network of destinations to immediately offer customers a broad array of destinations worldwide. While American Airlines currently operates an extensive regional network through its three regional carriers, it has never operated a fulltime charter jet service. This fact is its most glaring weakness. American Airlines Executive Jets opportunities come from the ability to tap into the extensive network and customer base of its parent company and immediately establish a loyal customer base. Threats obviously come from the two main competitors as well as the high cost of fuel in the industry. Objectives The objectives of the marketing plan are to reach 50 percent brand awareness in the target market before the first year of operation is complete, and 75 percent within two years. The market share plan is aggressive, as it is planned to obtain 5 percent of the market each of the first three years of operation, in an end goal to control 15 percent of the market after three years. Differentiation and Positioning

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET

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American Airlines Executive Jets will position itself within the same market as Delta Private Jets and NetJets, affluent, discerning customers who are seeking private charter services and a higher degree of flexibility and time management than is offered by our traditional commercial services. American Airlines Executive Jets will focus solely on providing customers with excellent, tailored service through the use of jet cards and direct charter services, and has no plans to offer fractional ownership, or technical operations services to current jet owners. American Airlines Executive Jets will also offer the most extensive route and connection availability of any charter company in operation today. Marketing Strategy American Airlines Executive Jets offers private charter jet service through prepaid jet cards or for hire charter services. This service will be offered on its fleet of 80 Embraer Executive Jets, which will increase over the next three years to a fleet of 250 jets. Jet

Size

Number in Fleet

Phenom 100

Up to 8

20

Phenom 300

Up to 11

20

Legacy 450

7 to 9

10

Legacy 500

8 to 12

10

Legacy 600

Up to 14

10

Legacy 650

Up to 14 Passengers

5

Lineage 1000E

15-25 Passengers

5

This paper is for educational purposes only, and is for a fictional entity.

MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET

This paper is for educational purposes only, and is for a fictional entity.

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET References Brown, D.P. (2011, June 28). An Inside Look at Delta Private Jets. Airline Reporter. Retrieved from http://www.airlinereporter.com/2011/06/an-inside-look-at-delta-private-jets-worldsabove-first-class/ Prince, R.A. (2013, June 11). Eight Trends In Private Jet Travel. Forbes Magazine. Retrieved form http://www.forbes.com/sites/russalanprince/2013/06/11/eight-trends-in-private-jettravel/ NetJets Unions Organise Picket. (2014). Airline Industry Information, Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/1563925893?accountid =27203 Charter & other nonscheduled air transportation services - quarterly update 8/25/2014. (2014). Austin: Hoover's Inc. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/1556079010?accountid =27203 Study by renowned conklin & de decker shows the air partner JetCard has the advantage. (2014, April 23). PR Newswire. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/1518278270?accountid =27203 De La Merced, M.J. (2011, November 29). American Airlines Parent Files for Bankruptcy. DealBook. Retrieved from http://dealbook.nytimes.com/2011/11/29/american-airlinesparent-files-for-bankruptcy/?_php=true&_type=blogs&_r=0

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET History of AMR Corporation and American Airlines. (2011). American Airlines Website. Retrieved from http://www.aa.com/i18n/amrcorp/corporateInformation/facts/history.jsp Karp, G. (2013, December 09). American, US Airways Complete Merger United Airlines Loses Title as World’s Largest Airline. Chicago Tribune. Retrieved from http://articles.chicagotribune.com/2013-12-09/business/chi-american-airlines-merger20131209_1_us-airways-ceo-ceo-doug-parker-united-airlines/2 Stephens, J.P. (2014, September 23). Activity 6-4 American Airlines. Embry-Riddle Aeronautical University. American Airlines Group (2014, July 24). American Airlines Group Reports Highest Quarterly Profit In Company History. PRNewswire. Retrieved from http://hub.aa.com/en/nr/pressrelease/american-airlines-group-reports-highest-quarterlyprofit-in-company-history Schlangenstein, M. (2014, October 2). American Airlines Asks U.S. for Tokyo Flight Slot Held by Delta. Bloomberg. Retrieved from http://www.bloomberg.com/news/2014-1003/american-airlines-asks-u-s-for-tokyo-flight-slot-held-by-delta.html Ahles, A. (2014, September 25). American announces plan to fly from DFW to Beijing. StarTelegram. Retrieved from http://www.star-telegram.com/2014/09/25/6148907/americanannounces-plan-to-fly.html NetJets Announces Comprehensive Climate Initiative. (2005). 3Degrees. Retrieved from http://www.3degreesinc.com/news/netjets-announces-comprehensive-climate-initiativesupported-3degrees

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MARKETING PLAN: AMERICAN AIRLINES EXECUTIVE JET Delta Private Jets. (2014). Private Jet Experiences the Way They Were Meant to Be. Delta Airlines. Retrieved from http://www.deltaprivatejets.com NetJets. (2014). NetJets 50th Soaring Higher. NetJets IP. Retrieved from http://www.netjets.com/Home/

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