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Merger between US Airways and American Airlines
Mergers and Acquisitions
On December 9th, 2013 the two airlines, US Airways and American Airlines merged to form the American Airline Group that turn out to be the major airline in the world. This merger was structured by the enlarged competition that airlines are countenancing in the business at present. The merger offered a prospect for both airlines to make use of the benefits of an extensive network that would effect subsequent to merging as countered to when each one operates separately. One of the foremost circumstances that encircled the merger was the imminent insolvency of American Airlines. The company in 2011 had filed for bankruptcy even though it relapsed to profitability the same year in July. The merger would enhance admission to opportunities of business for both airlines, particularly American Airlines that would decrease its coverage to financial risks, which were the preliminary grounds for the corporation filing for bankruptcy. The merger would generate enhanced synergies that would be apparent in the course of increased flexibility and financial strength in the market (DePamphilis, 2008).
Each of the entities merged would have admission to further destinations and bigger clientele. Each of them would admission to a bigger destinations network i.e. 300 destinations all around the world. They as well had a code share contract where customers would impeccably book their flights from any US Airways or American Airlines networks. Such controls are an enhancement to each of the airline’s ability and results to bigger business and performance.
There are a variety of positive traits of this merger. One of the major advantages is that both airlines will have eminent penetration of market than what they had beforehand. This is since they will be creating on a daily basis more than 6,500 flights to above 300 destinations in additional than 50 countries all around the globe It effected in enlarged revenues and improved governance of most important routes. The American Airlines Group subsequent to the merger, is a foremost player in the Latin American global market of airline (CAPA center for aviation). Exploitation of these prospects directs to enhanced market performance and superior capability to compact with aggressive pressure. This is since the fresh airline company, subsequent to the merger, has additional resources at its disposal that direct to superior performance.
An additional advantage of the merger is increase and diversification of the products offered by the airline (Boeh & Beamish, 2007). Alongside the code sharing contract that permits air travelers to book their trip from any of the websites of company, there is improved access to one world association. This entails the improved opportunities of networking for the airline in the course of business agreements with further players in the industry for instance Iberia, British Airways, and Finnair. It lets the customers’ additional choices of air travel and unforgettable experiences of travelling crosswise a superior and more improved network. This develops levels of customer satisfaction and is necessary in developing loyalty of customer.
The merger as well generates one of the finest-developed program of loyalty i.e. Advantage (American Airlines, 2014). Customers have superior access to prospect to possess and redeem miles crosswise the joint routes of both airlines. It constructs the customers gain from increased utilization of opportunities and capabilities in the wider market. It as well results in increased expediency for travelers, ensuing in cost savings.
The fresh organizational structure has perceived the Doug Parker retention as the Chief executive officer of the fresh entity. The merger has, consequently, seen the construction of simply one chief executive’s place as opposite to two in view of the fact that each one of these companies had its individual chief executive formerly. There were as well considerable changes in the Board of Directors for the fresh company. The newly appointed Board of Directors incorporated four representatives of US Airways employees and as well five representatives for creditors of American Airlines. The preceding Boards of the separate entities did not have such representatives.
Doug Parker was formerly the chairman and chief executive of US Airways. On the other hand beneath the new position, the chief executive will not be the chairman of the board.
The preceding companies in particularly US Airways had a variety of groups that exercised to operate underneath the chief executive. Such groups incorporated corporate affairs, marketing and revenue group, and finance, in addition to the operations groups. However underneath the new corporation, there are no such groups.
There were no chief changes in the practices of human resource subsequent to the merger. The fresh company, American Airlines Group, adopted the majority of its human resource strategies from US Airways and maintained the majority of its top managers. The foremost reason the corporation made no important changes in their human resource strategies is owing to reasons of business.
They wanted to preserve their combined market share where employees contribute a vital role. They were acquainted with the fact that preserving their existing employees to a certain extent than recruiting new ones would simply utilize the more forceful worldwide network they had access to. This was reflected in the fresh setup where representatives of employee straightforwardly represented concerns of employee in the board of directors. This was intended at enhancing the satisfaction level of for these workers. This is since advanced levels of satisfaction enhance employee retention levels. The majority of these employees had served a lot of years in both airlines and their knowledge was very important for the success of the fresh airline company.
The management at both companies had instituted that the majority of their non-impressive performances formerly, for instance those in 2011 that made American Airlines file for bankruptcy were primarily owing to callous market conditions. Employees had not added to the underperformance. The merger rendering the new entity to huge resources that might facilitate it to triumph over these market challenges. In actual fact the merger was seen as an prospect where the company would present the employees better compensation and benefits for their services (Bainbridge, 2003). It was perceive as a opportunity to close up the boil feuds that had been relentless among the two companies’ management and labor unions representing workers. This was additional widespread in American airlines than at US Airways. It concludes to union representatives being integrated in the Board of the fresh entity to make certain employee concerns were not looked downward upon.
The retention of the majority of the employees and practically a parallel organizational structure is owing to the effectiveness of training such personnel on leadership qualities (Galpin & Herndon, 2007). This is since the fresh entity would sustain minimal costs training these employees on facets of leadership in view of the fact that the airline had obtained a bigger global presence, as it turn out to be the biggest in the world. The development of leadership qualities in all its employees is decisive to the utilization of the opportunities offered by the bigger and more composite global market. Such employees are previously familiarized to the internal operations of the airline industry as opposite to new employees that would need substantial spending on induction and training.
American Airlines. (2014). AMR merger investor presentation. Retrieved on 8th March 2014 from http://phx.corporate-ir.net/phoenix.zhtml?c=117098&p=irol-irhome
Boeh, K. & Beamish, P. (2007). Mergers and acquisitions: Text and cases. New York. Sage publications.
Bainbridge, S. (2003). Mergers and acquisitions. London. Foundation press.
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