On April 2019, the American Airline Groups Inc. stated that it has cut its unit revenue expectations for the first quarter. This has been impacted by the government shutting down and grounding a number of its aircrafts that is inclusive of its 737 MAX fleet of planes, which has had a greater weigh in the negative results. Therefore, its unit revenue that measures how much airlines earn per seat flown in every mile, is expected to be flat up to around 1%, when compared to the preceding forecast, which had been flat up to 2% ( Chin, 2019) . In addition, the company has also been forced to trim its viewpoint for the adjusted pre-tax margin to range around 2.0%-4.0%, which varies from the previous tax margin of 2.5%-4.5%. This has also quoted an increase in the fuel prices; hence, this will result to an increase in the price for each seat flown per every mile for the quarter than the previous one. Over the three months, the American airline has cancelled approximately 940 flights due to the unplanned removal of 737 MAX aircrafts from service ( Chin, 2019) . The leading airline cancels 115 flights each day, which represents 1.5% of the airline’s total flying each day of the summer. In addition, it is yet to make further cancellations in the coming months if the 737 MAX fleet does not return to service. The airline has announced that at the time it is hard to make predictions of the financial price of service disruption. At this time, the company is in the fifth stage of corporate life cycle, the decline stage since it has registered a reduction in sales, profit, and cash flow. In order to reciprocate for the loss made, the airline plans to maximize its cash flow during the peak travel season, while it hopes for the recertification of its 737 fleet ( Chin, 2019) . However, in the next two months, the airline is likely to record more decline of profit since it is facing stiff competition from its competitor airline, Southwest Airlines, which plans to operate 34 of its aircrafts of the same model; hence, many customers may be compelled to use the Southwest airline ( Chin, 2019) . Therefore, American airlines has to adapt to the change by coming up with a better strategy or else it will lose its competitive advantage, forcing it to withdraw from the market.
References
Chin, K. (2019). American Airlines Trims Unit Revenue Outlook. The Wall Street Journal. Retrived from <https://www.wsj.com/articles/american-airlines-trims-unit-revenue- outlook-11554817544>
Delegate your assignment to our experts and they will do the rest.
