Running head: AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER

MARKET 1

American Airlines Flies Into the Low-Cost Carrier Market

Mark Thilo Williams

Goldey Beacom College

AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 2

Abstract

American Airlines is the considered to be the largest airline in the world (Statista, 2019). This

paper will attempt to identify the airline carriers’ strategic mission and objectives. It will also

provide a current assessment of the airline industry using Porter’s Five Forces and an analysis of

the American Airlines itself using a SWOT analysis. These analyses will reveal a major concern

facing the company is the entry of the low- and ultra-low-cost carriers into the airline industry.

The remaining paper will provide a brief overview of a proposal to address the issue by outlining

a strategy for AAL to enter into and compete directly in the low-cost carrier market by

transitioning its regional carrier brand, American Eagle, to operate separately from the current

model and commit solely to a low-cost carrier model. This will include defining the attributes of

a low-cost carrier model to use, which are based on the insightful scholarly works of Bachwich

& Wittman (2016) and Rosenstein (2013) and their studies of the low-cost carrier market; a

framework for which to steps to develop a formal strategy; and finally, a guideline to implement

and communicate the strategy. The paper will conclude by identifying the importance of modern

management theory to facilitate the strategy development process. Scholarly and practitioner

works, as well as other relevant studies were used to support the concepts and claims held in the

paper.
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 3

American Airlines Flies Into the Low-Cost Carrier Market

In 2013, American Airlines and US Airways merged to form American Airlines Group,

Inc. (Peterman, 2014). American Airlines Group, Inc. - Nasdaq ticker symbol, AAL - is a

Delaware corporation with its main headquarters in Ft. Worth, TX (American Airlines Group,

Inc., 2019). The brand is globally recognized as a major network carrier that provides air

transportation for passengers and cargo (American Airlines Group, Inc., 2019); it is also

considered to be the world’s largest airline (Peterman, 2014). In addition to providing air

transportation under the popular name, American Airlines, AAL includes other operations as

well; for example, it operates a regional carrier service under the brand, American Eagle, which

includes Envoy Aviation Group, PSA Airlines and Piedmont Airlines, and third party carriers

such as Republic, Mesa, Compass, and SkyWest. It also provides cargo transportation (American

Airlines Group, Inc., 2019). The airline operates through hubs in Chicago, Charlotte, London,

Dallas, Los Angeles, Miami, Philadelphia, New York, Washington, DC, and Phoenix (American

Airlines Group, Inc., 2019). By the end of 2018, the air carrier provided service for roughly 204

million passengers and operated 956 airplanes with an additional 595 planes through its regional

and third-party carriers (American Airlines Group, Inc., 2019). Customers purchase tickets either

directly from its website, www.aa.com, or through third-party distribution channels (American

Airlines Group, Inc., 2019). AAL is a founding member of OneWorld alliance, which, by

partnering with other airline carriers throughout the world, is able to readily facilitate service to

more than 1,000 destinations in over 150 countries (American Airlines Group, Inc., 2019).

According to the airline’s 2018 annual report, total sales for the year came to $44.5M; total

expenses were $41.9M—consisting mostly of salary/wages and fuel related charges; and net
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 4

income for the year amounted to $1.4B, which was down compared to three of the last four

years—with a slight improvement over 2017 (American Airlines Group, Inc., 2019).

For a solid understanding of a company’s current state, Dergisi recommends analyzing its

strategic management processes (2017). Dergisi recommends identifying the organization’s

vision and mission statements (2017). For an understanding of the airline industry, an analysis

using Porter’s Five Forces is in order; and Dergisi also suggests analyzing the external and

internal factors impacting the organization (2017).

While neither a vision or mission statement could be found, a handout from the AAL’s

annual leadership conference in January 2019 describes three strategic objectives of the

company: Make Culture a Competitive Advantage, Build American Airlines to Thrive Forever,

and Create a World-Class Customer Experience (Leff, 2019). In addition, the company states in

its latest 10-K filing that, “Our business plan contemplates continued significant investments

related to modernizing our fleet, improving the experience of our customers and updating our

facilities” (p.20).

According to Omsa, Abdullah, & Jamali, Porter’s five industrial competitive forces that

can affect the performance of a company are the threat of rivalries, the threat of new entrants, the

threat of substitutes, the bargaining power of suppliers, products or services and the bargaining

power of buyers (2017). The airline industry is an intense and highly competitive industry,

particularly since the industry was deregulated; therefore, rivalry among existing competitors in

the airline industry is considered to be high (Pearce, 2013). Driving this intense rivalry is the

non-diminishing rate in overall capacity, coupled with constraints on slot allocation

(International Air Transport Association, 2011), and a high fixed and variable cost structure that

significantly impedes operating margins in a very price elastic industry (Pearce, 2013). The
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 5

threat of new entrants in the airline industry is also high (Pearce, 2013). On average, about thirty

new airlines have entered the industry each year for the past 40 years; and despite low profit

margins, entry rates are steadily increasing (International Air Transport Association, 2011). The

threat of substitutes in the airline industry is considered to be medium and rising, with the

biggest threat coming from the option to simply not fly, especially with the advances in web

conferencing (Pearce, 2013). The bargaining power of suppliers in the airline industry is high,

given the limited number of companies providing airport services, aircraft and engine

manufacturers, and prevailing power of labor unions in the airline industry. Finally, the

bargaining power of buyers in this industry is also high, as there is little to no service

differentiation; as price transparency continues to increase because of advancements in global

distribution systems like priceline.com, kayak.com and other aggregator websites; and as air

travel continues to become more and more a discretionary spending item (Pearce, 2013).

The next step is to conduct a SWOT analysis. According to Krupka, Kantorova & Haile,

a SWOT analysis segments the factors impacting an organization according to internal and

external factors, whereby the internal factors are sub-grouped according to Strengths (S) and

Weaknesses (W), and the external factors are sub-grouped according to Opportunities (O) and

Threats (T) (2018). Starting with the internal factors, a principal strength exhibited by AAL over

the last few years is its OneWorld Alliance membership program (Harrison, Kalburgi & Reed ,

2012; Bhasin, 2018; and American Airlines Group, Inc., 2019). The alliance allows AAL to

revenue-, code- and slot-share with affiliate airlines throughout the world, which allows it to

easily expand its footprint, increase passenger loads, and extend its brand into otherwise

inaccessible markets (Gu &Zhu, 2016). AAL also has a strong flyer program called, AAdvantage

(Harrison, Kalburgi & Reed , 2012; Bhasin, 2018; American Airlines, (n.d.); and American
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 6

Airlines Group, Inc., 2019). A notable strength of AAL is its size and passenger capacity:

American Airlines is the largest airline in the world, allowing it to leverage its size for superior

economies of scale versus its competition (Bhasin, 2018; Essays, 2018; Peterman, 2018). Finally,

as mentioned, the American Airline brand name is highly regarded throughout the world

(American Airlines Group, Inc., 2019).

There are several weaknesses of the company; one, for example, is customer service

(Essay, 2018; Harrison, Kalburgi & Reed, 2012). In a study of the 10 largest airlines, AAL was

ranked last in a “hassle” survey (Harrison, Kalburgi & Reed, 2012, p.5). AAL also ranked last in

a Bloomberg study of airline service charges and customer satisfaction. Another weakness for

AAL is the lack of a vision or mission statement. After searching the company’s website, the

internet and placing calls to both, AAL’s EthicsPoint Hotline (American Airlines, n.d.-a) and its

Investor Relations office (American Airlines, n.d-.b), neither a vision or mission statement were

readily referenced. This is alarming, particularly given Nataraja & Underhill’s assertion that in

the airline industry, vision and mission statements are considered vital in strategy development

(2017). Another weakness centered on high costs, as well as legacy pricing methods and

strategies; for example, its revenue management technologies ignore ancillary sales (e.g. checked

bags, onboard food, seat selection, etc.), nor do they account for individual consumer behavior

patterns like those of new emerging models (Boin, Coleman, Delfassy & Palombo, 2017; Essay,

2018; Bhasin, 2018; and Carrier & Figg, 2018).

In analyzing the external factors impacting AAL, a key opportunity is its American Eagle

regional routes (Essays, 2018). According to the International Air Transport Association (IATA),

a key area of opportunity is for airlines to shift to more point-to-point travel (2018). Also, the

IATA suggest shifting more flights out of secondary airports can also address increasing costs
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 7

and congestion at large hubs (2018). In another report by the IATA, airlines tend to cut prices

after new entries enter the market; but not in anticipation of or to deter entry (2011). Finally,

given that global tourism has steadily increased (Bhasin, 2018), is projected to outpace growth in

GDP (Morris, 2017), and that passenger growth in developing markets is poised to outpace

developed markets into 2035 (Morris, 2017), it may behoove AAL to prepare itself to enter into

this segment by 2035 by conducting preliminary tests and expanding its regional carrier model in

the U.S. first.

Finally, among the threats faced by AAL, the significant reduction in the pool of available

pilots is a major one. AAL is faced with an unusually high number of its commercial airline

pilots approaching the mandatory retirement age of 65 (American Airlines Group, Inc., 2019).

Compounding the issue is the consistently shrinking pool of available military-trained pilots

entering the private sector (American Airlines Group, Inc., 2019); and to add to the concern, the

number of flight hours needed to satisfy the requirement for a commercial pilot license has

recently increased from 250 to 1,500 hours (American Airlines Group, Inc., 2019). Lastly, AAL

not only operates in an intense and highly competitive market (Bhasin, 2018; American Airlines

Group, Inc., 2019; Harrison, Kalburgi & Reed, 2012; and Essay, 2018), but the frequencies of

changes to organizational and industry composition over the last 15-20 years have been

significant (Prince & Simon, 2014 and Hsu & Flouris, 2016).

Another threat to American Airlines is the entry of low-cost carriers like Southwest and

JetBlue, and ultra-low-cost carriers like Spirit and Frontier (American Airlines Group, Inc., 2019;

Bachwich & Wittman, 2016; and Rosenstein, 2013). The airline states in its most recent annual

report, “Low-cost carriers (including so-called ultra-low-cost carriers) have a profound impact on

industry revenues.” (p.17). While AAL is considered the largest airline, the claim is based on
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 8

overall sales (Statista, 2019), as the leadership share of the U.S. market throttles between

Southwest, Delta and American (Statista, 2019; Bureau of Transportation Statistics, 2019). In

addition, the new entry low- and ultra-low-cost carriers are not only price competitive, but are

also luring passengers by providing better customer service and a better flight experience

(Harrison, Kalburgi & Reed, 2012). In a study by J.D. Power & Associates (2018), Alaska

Airlines and Delta were regarded as tops in terms of passenger satisfaction – with AAL scoring

well below average (2018).

Within the last half century, the airline industry has only seen its business model

impacted twice: by the formation of alliances and the entry of low-cost carriers (International Air

Transport Association, 2018). While the industry’s stability may be cause to dismiss the impact

of low-cost carriers, a study by the International Air Transport Association (IATA) acknowledges

these new carrier models are having a monumental effect on airline industry world-wide (2018).

Also, while low-cost and ultra-low-cost carriers are luring new passengers by providing lower

fares in the U.S., the model is impacting the lucrative emerging routes as well, for example, the

emergence of Lion Air out of Malaysia (Thai Lion Air, n.d.). AAL acknowledges the risk the

low-cost carrier model poises (American Airlines Group, Inc., 2019), particularly as the air

transportation market continues to grow into 2035 (International Air Transport Association,

2018) and passengers continue to opt for the lower fares and better customer service (Bachwich

& Wittman, 2016). However, a review of its strategic objectives indicates no formal effort to

develop a strategy to deal with this concern (Leff, 2019).

A study commissioned by the IATA predicts airports in the future may begin to resemble

small cities, or aerotropoles, but they will assuredly look different (2018). The study also

suggests that to avoid current auto and flight traffic, airlines will significantly influence the new
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 9

airport designs into 2035 through slot allocation negotiations and strategies to effectively manage

flight and passenger congestion (2018). According to the study this fact coupled with the

likelihood that passengers will opt more often for high-speed trains to commute over short

distances, a shift towards secondary and tertiary airports can be expected (2018). This assertion

by the IATA, combined with the issue of low-cost carrier models mentioned previously, presents

an excellent opportunity for AAL to exploit an existing mature market, while simultaneously

explore a new one.

According to O’Reilly & Tushman, organizational ambidexterity is the ability of an

organization to explore new markets and opportunities while it simultaneously exploiting

existing and mature markets where it has competitive advantages (2013). The authors purport

that this is essential if an organization is to thrive, particularly given the findings from Stubbart

& Knight that less than .1% of companies survive past 40 years (2006). Thus, to survive,

companies need to explore new markets. A new market for AAL to explore is to enter and

compete directly in the low-cost carrier market. At the same time, AAL can expand (exploit) its

profitable routes. To start, AAL would identify and reallocate the underperforming routes in its

existing hubs, and instead have them fly out of regional and/or secondary airports under the

American Eagle brand. The American Eagle regional carriers will commit solely to operating

according to a low-cost carrier model—separate and distinct from the company’s current legacy

revenue model. As an example, AAL could identify the lowest performing 10-20% routes at its

large market hubs and replace those with service to more popular and profitable destinations, by

either expanding profitable domestic flights or providing new service to the emerging middle-

class markets in China and India (International Air Transport Association, 2018). Instead of

stopping service to the underperforming routes altogether, they would be reallocated to regional
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 10

or secondary airports. This would be an effective reallocation of gate space to use for more

profitable routes, especially considering the scarcity and competition for slot allocation at large

hubs (Souza, Li & Garcia, 2017). It is also an effective way to exploit an existing mature market.

Also, the reallocation of planes, both to gates at large hubs and to regional airports, will improve

the company’s cost of capital and capacity utilization of its fleet by putting more planes into

service. Alternately, the company could also simply service small to mid-size market routes out

of these regional airports, as is the strategy of choice for one of the more successful ultra-low-

cost carriers, Allegiant Air, as it has over 70% of its flights going to nothing but small or non-hub

airports (Bachwich & Wittman, 2016).

The New Castle (Wilmington) Airport in Delaware is an excellent test site for AAL to

implement a low-cost carrier model. The airport is about 20 miles from the Philadelphia

International airport (PHL), which is a one of AAL’s large hubs; therefore, there are resources

nearby to support and implement a feasibility assessment. In addition, the Newcastle Airport can

mitigate airport expenses incurred at PHL by serving as an additional hangar for planes flying

out of PHL, since regional airports charge lower airport fees compared to large hubs (Cervinka,

2017). Not to mention, according to Cervinka, low-cost carriers will opt for regional/secondary

airports because they are able to use their market and bargaining power to reduce the fees the

airport charges (2017). This strategy has served well for ultra-low-cost carrier, Ryanair (Caputo

& Borbely, 2016). In addition, the airport has the infrastructure in place to support regional

planes and service as it once provided service for low-cost carrier, Frontier Airlines (Goss, 2015).

Finally, the airport is close to over 20 million people within a 100-mile radius and nearly 40

million within 150 miles, which makes it accessible to nearly a quarter of the entire US

population (U.S. Economic Development Administration, n.d.).

AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 11

A cutting-edge alternative AAL may consider is to convert former air force/navy

installations that have been closed or are about to close because of the Defense Base Closure and

Realignment Act of 1990 (Mason, 2013; Wheeler, 2016) into regional airports. Mason and

Wheeler both point out that the surrounding communities have the capabilities readily in place to

support commercial enterprises ((Mason, 2013; Wheeler, 2016). Mason also states that the

military is prepared to dispose of the property, and the law governing BRAC allows for the sale

of property for regional economic development to be below market value, or even at no cost at

all (2013).

Regardless of whether it uses a regional airport or a former military base, the idea is to

secure service at a facility with the appropriate infrastructure in place to successfully operate

using a low-cost carrier model, while simultaneously profiting from adding flights to more

lucrative routes and the cost benefits from reallocating routes to a low-cost carrier model. In

addition, the airline will begin to explore operating in a low-cost carrier market that is only

becoming a bigger threat in the future (American Airlines Group, Inc., 2019; Bachwich &

Wittman, 2016; Harrison, Kalburgi & Reed, 2012; and Bhasin, 2018).

Bachwich & Wittman provide an excellent account of the benefits and implications regarding

adopting a low-cost or ultra-low-cost carrier model in retrospect to network legacy carrier (NLC) models

like American Airlines (2016). The authors highlight Spirit Airlines and Allegiant Airlines which

both successfully transitioned to a low-cost carrier model by fully committing to lower costs and

the carrier model employed by Ryanair (2016). According to Bachwich & Wittman, key features

associated with low-cost carrier models are lower costs, especially in comparison to NLCs, and

growing revenues via unbundling services, which then become sources for ancillary revenues;

for example, by charging for checked baggage, onboard food and beverages, etc., Allegiant went

from collecting $3.40 in ancillary revenue per passenger segment in 2003, to $21.53 per
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 12

passenger by 2007; and Spirit increased its revenue per passenger at a rate better than NLCs and

most of the industry during the same period following the same strategy (Bachwich & Wittman,

2016). In addition, Allegiant saw capacity and traffic increase each year (2005-15), while also

remaining profitable during the same period; whereas Spirit Airlines has increased profits, traffic

and capacity at rates far better than the NLCs (Bachwich & Wittman, 2016).

In terms of cost saving strategies, according to Bachwich & Wittman, ultra-low-cost

carriers, on average, had 18% lower unit cost than low-cost carriers, and 31% lower unit costs

than NLCs (2013). A focal point of those cost savings come from reducing salary expenses;

however, making up the difference by providing flight crew with a percentage of all sales

rendered during flights (Bachwich & Wittman, 2016).

Bachwich & Wittman also studied the impact off the low-cost and ultra-low-cost

carrier models on flight fares (2016). Using an econometric model, the authors note that the

presence of both the low-cost and ultra-low-cost carriers in a market resulted in 20% lower fares,

with evidence to suggest a trend in the presence of ultra-low-cost carriers will impact price

pressures twice as much as low-cost carriers (2016).

In another notable study, Rosenstein identifies a few key attributes for the

successful transition into the low-cost carrier market: an ideal one-way route should entail at

least 200 passengers per day; the current fares should be priced above average; and while the fare

must be able to be reduced by at least 25%, the segment’s profit margin must increase by at least

25% to continue servicing (2013). Rosenstein also states, market share is not important:

profitable routes are, citing point-to-point flights as ideal (2013). He also asserts that carriers

adopting this model can minimize costs of travel agents and call centers by reducing the need for

them; that flight seating should be single-class, high density, with no seat assignments; charge for
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 13

all meals and drinks; and in concurrence with Bachwich & Wittman (2016), turn normal airline

cost centers into profit centers when/where possible (2013). For capacity strategies, Rosenstein

suggest using a single type aircraft with high utilization; whenever possible, fly out of secondary

or uncongested airports; ignore high frequency routes; uses only using short sector lengths; and,

as in accords with Bachwich & Wittman, reduces wage expenses but still offers competitive

salaries by offering profit sharing, which has also shown to improve customer service (2013).

The strategy mentioned is a brief overview as a potential means to address the entry of

low-cost carriers. Therefore, a formal analysis and strategy development by an internal team at

American Airlines is certainly be needed to adequately evaluate its viable merits. Lafley and

Martin provide an excellent strategy model for AAL to consider in order to properly frame and

analyze the viability of this opportunity, along with steps for strategic implementation and

communication (see Figure 1).

According to Lafley & Martin, strategy is about making decisions around a specific set of

integrated choices that positions an organization to win in the marketplace (2013). The authors

propose a strategic development process that is framed around answering five questions: “What

is your winning aspiration?—the purpose of your enterprise, its motivating aspiration. Where

will you play?—a playing field where you can achieve that aspiration. How will you win?—the

way you will win on the chosen playing field. What capabilities must be in place?—the set and

configuration of capabilities required to win in the chosen way. What management systems are

required?—the system and measures that enable the capabilities and support the choices.” (p.26).

The authors outline both a framework of the questions noted above and specifics surrounding

how to answer the questions as well (2013). For example, in addition to addressing the above set

of questions, the authors state that asking, “what would have to be true?” (p. 186), is key to not
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 14

only transitioning between the sets, but more importantly, overcoming disagreements and

contentious dialogue (2013). For further details, the authors provide a seven-step process to

overcome those road blocks (see Figure 2): 1) frame the choice; 2) generate strategic

possibilities; 3) specify conditions; 4) identify barriers to choice; 5) design valid tests; 6) conduct

tests; and 7) choose (2013). While the assembly of those involved in the assessment and strategic

development is left to the organization to decide, the authors do point out that the team(s) should

include employees of all levels in the discussion in some manner (2013). For instance, in an

example provided, the topic of strategic discussion was addressed by three different teams: one

consisting of staff, the other management and the other executives. Each team assessed the issue

using the same set of choices/questions as a framework, but separate and apart from one another.

Then another team was formed consisting of members of the prior three teams as well as other

employees determined to have significant knowledge and involvement in the strategic

development (2013).

The authors also describe action steps to communicate the strategy once it been

developed and agreed on, for example, the organization must first identify the salient theme(s) of

the strategy that everyone in the organization needs to know and understand (2013). Also, the

authors state that the language needs to be simple so that themes can flow up, down and

sideways in both formal and informal organizational discussions (2013). Next, the authors

encourage the use of direct broadcasts of the message to the whole organization, for example,

townhall meetings, company internet postings, organizational memos, etc., and where applicable,

include the strategy in review meetings as well (2013).

Fort & Price reiterate much of the same in providing an excellent account of how to

communicate strategy in an organization (2016). The authors describe a five-stage framework:

AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 15

Business Case, which includes goals, funding model and metrics—in order to confirm direction;

Strategy, which includes future state, max impact and model changes—in order to make a

recommendation for a communication strategy; Align, which includes, stakeholder, impact and

alignment—in order to revise and align the communication strategy; Message, which includes

target audience, story and impact—in order to determine the story/message to be disseminated;

and finally, Tactics, which includes collateral, implementation and delivery—in order to tell the

story (2016).

Lafley & Martin advise that the ideal format to facilitate discussions during the strategic

development process entail what they call, “assertive inquiry” (2013, p. 147). According to the

authors, this approach fosters continued dialague around the set of choices and effectively

transitions the discussions to making decisions. Assertive inquiry was developed by

organizational learning theorist, Chris Argyris of Harvard Business School (Lafley & Martin,

2013). According to Lafley & Martin, this approach is about “articulating your own ideas and

sharing the data and reasoning behind them, while genuinely inquiring into the thoughts and

reasoning of your peers.” (2013, p. 147). This approach is hinged on the notion that while actors

involved in strategy development may have an idea worth hearing, the actors need to maintain

that the idea may be missing something (Lafley & Martin, 2013); thus, it encourages learning.

Chris Argyris is considered the father of organizational learning (Fulmer, R. & Keys, B., 1998).

Argyris credits William F. White, Roger Barker and especially, Kurt Lewin, for inspiring his

works (Fulmer & Keys, 1998). According to Papanek (2017), Kurt Lewin and his contributions

were housed in modern management theory (2017). While Fulmer & Keys cite Argyris as the

father of Organizational Change (1998), Batras & Smith place Lewin at the forefront of

Organizational Change Theory (2016). Therefore, the basis of the implementation of the strategy
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 16

described earlier, particularly as it relates to engaging the actors in dialogue, will undoubtedly be

influenced by the modern management school of theory. Also, as previously mentioned, the

seven-step process to facilitate conversational discourse includes designing and conducting tests

(Lafley & Martine, 2013), which the authors respectively describe as “for each key barrier,

design a valid test sufficient for generating commitment,” and “conduct hypothesis-driven

analysis, testing the conditions with the lowest confidence first” (p. 188). While this requirement

for scientific analysis and structure suggests the notion of Taylorism and scientific management

theory according to the definitions of Uddin & Hossain (2015), Kwok (2014) and Hatch (2018),

unlike classical management theory, the use of Argyris’ assertive inquiry approach does not

ignore the human element, and in fact, it is considered vital in facilitating the strategy proposed

by Lafley & Martin (2013). Therefore, given the strategy framework by Lafley & Martin, which

emphasizes the attention on the behaviors of the actors involved in the development of the

strategy; the mandate for designed tests; and combined with the implementation of the

communication strategies—whether Lafley & Martin’s or Fort & Price’s communication model),

the strategy framework by Lafley & Martin proposed in this paper for American Airlines is in

accord with modern management school of theory, per the definition of Uddin & Hossain (2015),

Ochoa & Mujtaba (2011), Yang, Liu & Wang (2013) and Onday (2016).
AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 17

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Figures

Figure 1. [As posits by Lafley & Martin, 2013, p. 28]

AMERICAN AIRLINES: FLYING INTO THE LOW-COST CARRIER MARKET 23

Figure 2. [As posits by Lafley & Martin, 2013, p. 188]