The American Airline Report
The Business Model Canvas
The Business model canvas for American Airlines provides a rationale, through which the company creates, delivers, and enhances values in the company products and services. American airlines have nine blocks that show how the company has the interest to improve its service delivery. The main four areas include financial viability, offer, infrastructure, and customers. The business model canvas acts as a strategy that is used to implement through the company’s processes, systems, and frameworks. Thus, American Airline had a reliable business model canvas that guides its operations and strategies in achieving its targets. The company targets to expand its market share in the next five years and improve service delivery (Osterwalder & Pigneur, 2013). The business model canvas provides a detailed approach and direction to the achievement of the company’s targets.
Fig1. American Airline Business Model Canvas
| Key Partners | Key Activities | Value Proposition | Customer Relationship | Customer Segments |
| Joint ventures | Production | Easy of travel | Personal assistance | Mass markets |
| strategic alliances | Problem solving | Frequent reliable departures | Self-service | Diversified |
| buyer-supplier | Networks | Low-ticket prices | Communities | Segmented |
| Cooperation | Refundable ticketless flights | Co-creation | ||
| Key Resources | Channels | |||
| Physical assets | In house sales | |||
| Intellectual | online ticketing | |||
| Human | Sales personnel | |||
| Financial | Web sales | |||
| Cost Structure | Revenue Streams | |||
| Fixed costs | Asset sales | |||
| Variable costs | Ticket fees | |||
| Economies of scale | leasing/renting | |||
| subscription fees | ||||
| Advertising |
Customer Segments
The customer segment in the American airline canvas comprises the group of people who serve the aim of the organizations. American airline depends on its customers to survive. To satisfy its customers, the company should group the customer needs in the same segment. In other business model canvass, the customer segments contain several large or small customer segments. However, the American airline customer segments contain a common customer segment unit that identifies the customers who are served by the organization. American airlines need to have a customer segment in order to relate customers to different distribution challenges, justify offers, promotes different products, and understood the different aspect of offers and relationships. American airlines focus on the mass markets (Osterwalder & Pigneur, 2013). Thus, it does not distinguish the different customer segments. It focuses on value progressions, distribution channels, and customer relationships of the customers. American Airlines focuses on the mass markets in order to promote its services and products to the different potential and profitable customers.
The aspect of American Airlines’ business model canvas seeks to understand the various products and services to promote value in the particular customer segments. Value proposition assists in ensuring American airlines can fight over other airline companies in meeting customer needs. American airlines consider operating low cots airlines to accommodate business travelers. Value proposition includes ease of travel, frequent reliable departures, low-ticket prices, and refundable ticketless flights. Value propositions identify the requirements of the various specific customers in the company. It may be innovative and thus, represent offers. Nevertheless, American airlines on the value proposition to identify existing markets offers. Value proposition creates value for the customer segments through the distinction of the different customer needs. Performance is a key relevant aspect of value proposition (Osterwalder & Pigneur, 2013). These assist products or service performance in creating products and services value. The business model canvas has better graphics in order to produce the corresponding growth in order to meet customer needs.
Channels
The channels explain the organization’s communication that assists in reaching the customer to deliver a value proposition. Distribution channels, communication, and sales strategies help to link the company with potential customers. The channels play a significant role in enhancing the customer experience with the company. This includes raising awareness among customers, assisting customers, allowing customers to evaluate the company’s value proposition, delivery of value proposition, and offering post-purchase support. Through the channels, the company is able, to meet its customers. Channels segments are relevant in bringing value proposition into the mass markets. American Airlines values its challenges by including in-house sales and website sales. The in-house and website sales improve the channels, in which the customers can be linked to the organization. It assists in integrating customer experience and the increased revenues in the organization.
Customer Relationships
American airlines uphold customer relationships, as they identify the different types of relationships that exist in a company with its specific customer segments. American airlines clearly state the kind of relationships it seeks to establish with its customer segments. American airline’ relationships are motive by customer acquisition, customer retention, and upselling. The relationships with the company are motivated by lowering discounts on return tickets. Some of the discount assists in targeting the competitive markets in order to enhance customer retention and maximize revenues. Mostly, American Airlines engages in automated services. This type of relationship assists the customers to practice self-service. Automated processes recognize the customers and their personal characteristics. This is the best relationship in American Airlines, as it is simple and reliable in stimulating a personal relationship. The customer relationships in American Airlines assist in enhancing the company’s model in improving the overall customer experience.
Revenue Streams
This part of the business model canvas assists in obtaining the cash generated in each customer. If the customers are relevant in the business model canvas, similarly the revenues streams play a significant role in the American airlines business canvas model. Each revenues stream has its own differentiated pricing strategy and thus, it is managed separately. The American airline’s business model assists in providing a value proposition. Nevertheless, the revenues streams seek to relate value to revenues obtained from the customers. There are various ways of obtaining revenues in American airlines that include assets safes, subscription fees, ticket collections, and renting. American airline maximizes the various revenues streams to increase productivity in the company.
Key Resources
American airlines have key resources as the most important assist in order to control and operate the business model. These key resources assist in reaching the markets, maintenance of relationships, and earning revenues. Thus, the key resources are relevant in the operation and management of the business model. The key resources include physical, financial, human, intellectual aspects. American airlines’ key resources are either owned or leased from other key partners to the airline company. The key resources are significant in the company hence; it cannot operate or function without the key resources.
Key Activities
The key activities represent the most important essentials in promoting operations in the company. American airline relies on its key activities for the proper functioning of its business model. Similarly with key resources, the key activities assist in creating and offering value propositions, earnings revenues, reaching new markets, and maintaining customer relationships. Key activities include the online ticket systems that assist in the online selling of tickets. Production activities include providing the services in the company such as passenger carriage to their destinations (Osterwalder & Pigneur, 2013). In addition, it involves problem-solving activities that offer solutions to the specific problems faced in the company. American Airlines records the key activities as important in the productivity of its processes.
Key Partnerships
The key partners are also included in the traditional business model canvas of American airlines. This indicates the connections of suppliers and partners in the business. American airline has created alliances with other business models in order to reduce risks and acquire new resources. This partnership includes strategic alliances, joint ventures, and buyer-supplier relationships. The key partners are designed to allow optimum allocation of resources. This makes it logical that the economy of scale partnerships assist in reducing costs. The key partnerships are relevant in minimizing costs in order to promote relevant capabilities.
Cost structure
The cost structure indicates the expenses and costs incurred in the American airline business model. The costs incurred in the business-operating model enhance value delivery, maintenance of customer relationships, and generation of revenues. All the other segments in the business model canvas incur costs. Thus, the American airline model is cost-driven and thus, the company had sought to build low costs structures. Lowering the costs of operating in the American airline helps to maximize margins. The minimization of the costs is relevant in order to ensure maximum revenues are gained.
New Business Model
The airline business is a complex business that needs a new business model. People should be able to fly at lower prices. According to IATA, the cost of travel has been reduced by 60 percent while the number of travelers has increased largely. In the late 2000s, the airlines earned an EBIT margin of 0.7 percent. Customers have accepted that price varies depending on the price differentiation systems for the different processes. The new business model seeks to build a new approach to reposition the company in the airline industry in order to tackle the pertinent issues. The new business model will provide sustainability into enhancing competitive advantage.
In the generation of the new business model, the company uses the ideation process that occurs through prototyping. Prototyping assists in reducing the number of issues to five key potential business innovations. The five key innovations in the business from the idea of a business model prototype. American Airlines’ creation of the new business model canvas involves innovations to increase its revenues and influence its competitive advantage. The company selects a team that participates in innovation participation in order to indicate a value in exploring the new business model.
The open strategy helps in promoting the nature of the business strategy with a focus on open innovation. This seeks to expand value creation among the different organizations. The open strategy needs to sustain a portion of the value created by innovation. Openness has assisted in shifting the focus from ownership to reconsideration of the processes that deliver and capture value. Nevertheless, the open innovation products have faced challenges from the traditional business strategy. Certain costs reduce the industry’s costs while still facing continued competition (Kaplan, 2012). The innovation business model is customer-driven. The customer-driven innovation model is based on the customers’ needs and facilitates access in order to enhance competitive advantage in the industry.
Fig4. Customer-Driven Innovation Business model
| Key Partners | Key Activities | Value Proposition | Customer Relationship | Customer Segments | |
| Joint ventures | Production | Easy of travel | Personal assistance | Mass markets | |
| strategic alliances | Problem solving | Frequent reliable departures | Self-service | Diversified | |
| buyer-supplier |
|
Low-ticket prices | Communities | Segmented | |
| Cooperation | Refundable ticketless flights | Co-creation | |||
| Key Resources | Channels | ||||
| Physical assets | In house sales | ||||
| Intellectual | online ticketing | ||||
| Human | Sales personnel | ||||
| Financial | Web sales | ||||
| Cost Structure | Revenue Streams | ||||
| Fixed costs | Asset sales | ||||
| Variable costs | Ticket fees | ||||
| Economies of scale | leasing/renting | ||||
| subscription fees | |||||
| Advertising |
The Customer driven focus relies on open coordination to build strong relationship with the entire business processes. The business innovation represents the integration of various units in an open innovation model made up of multiple segments. As a company is involved in the innovation process, it might capture the bulk nature of the innovation and protection of the flight rights of the company. American airlines focus is to minimize costs for its customers in order to expand to new destination and markets. Thus, the incorporation of open innovations in the new model assists in being closer to its goals. The new product development focuses on the efforts of developing the business model in order to diversify its markets and capture value. Innovation focuses on the translation of technical success and sales success to commercialize the systems.
Technologically, product innovation is considered a significant subject in enhancing American airlines competitiveness. Process of innovation especially the organizational formats need particular new business models. Thus, the new business model is developed by technological innovation. This assists in dealing with the rising development costs and reduced product life cycles in the company. This indicates the need to control the research and development resources in saving time and money in innovation processes. In addition, the nee innovation model is able to transform the revenue streams obtained from the company. In order to increases the revenues streams, the company should license new products and services to be offered by the American airlines such as new routes and destinations. This indicates the willingness of the company to pursue new revenue opportunities (Kaplan, 2012).
The traditional business model in American airlines explains the adoption of carrier in a changing marketplace in airline industry that makes it difficult for the American airline. Certain disruptive changes relating to the internet focused business behaviors of the passengers and strong competition that calls for more resources. Specifically, the existing airlines companies are no longer able to charge the customers premium in certain markets because of entry point characterized by lower cost carriers.
The new business model is perfect than the traditional business model. Since, the new business model undergoes experimentation and alterations to yield better outcomes. This contributes in the identification of the need for the new business modes that leads to value creation. While, the innovation approach of business models has various benefits that it identify various risks, emphasizes on mutual dependence of people, understands the strengths and weakness of the business model and market changes. This makes it appropriate for leveraging value in the vital need to sustain organizations pro
References
Kaplan, S. (2012). The business model innovation factory: how to stay relevant when the world is changing. New York: John Wiley & Sons
Osterwalder, A., & Pigneur, Y. (2013). Business model generation: a handbook for Visionaries, game changers, and challengers. New York: John Wiley & Sons