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Mergers And Acquisitions Essay

1253 words - 6 pages

Merger between American Airlines and US Airways

The two airlines American Airlines and US Airways merged on December 9th, 2013 to form the American Airline Group that became the biggest airline in the world. This merger was formed by the increased competition that airlines are facing in the business today. The merger presented an opportunity for both airlines to exploit the benefits of an extended network that would result after merging as opposed to when each operates independently. One of the main circumstances that surrounded the merger was the impending bankruptcy of American Airlines. The company had filed for bankruptcy in 2011 although it reverted to profitability in July the same ...view middle of the document...

After the merger, the American Airlines Group is a leading player in the Latin American international airline market (CAPA center for aviation). Exploitation of these opportunities leads to improved market performance and greater capability to deal with competitive pressure. This is because the new airline, after the merger, has more resources at its disposal that lead to improved performance.

Another benefit of the merger is diversification and increase in the number of products offered by the airline (Boeh & Beamish, 2007). Besides the code sharing agreement that permits air travelers to book their flights from any of the company websites, there is increased access to one world alliance. This involves the increased networking opportunities for the airline through business agreements with other players in the industry such as British Airways, Iberia and Finnair. It allows the customers more air travel choices and memorable travelling experiences across a larger and more enhanced network. This improves customer satisfaction levels and is essential in developing customer loyalty.

The merger also creates one of the best-developed loyalty program i.e. Advantage (American Airlines, 2014). Customers have greater access to opportunities to own and redeem miles across the combined routes of both airlines. It makes the customers benefit from increased exploitation of capabilities and opportunities in the wider market. It also results in increased convenience for travelers, resulting in cost savings.

The new organizational structure has seen the retention of Doug Parker as the chief executive officer of the new entity. The merger has, therefore, seen the creation of only one chief executive’s position as opposed to two since each of these companies had its own chief executive previously. There were also significant changes in the board of directors for the new company. The new board of directors included five representatives for creditors of American Airlines and also four representatives of US Airways employees. The previous boards of the separate entities did not have such representatives.
Doug Parker was previously the chief executive and chairman of US Airways. However under the new dispensation, the chief executive will not be the chairman of the board.

The previous companies especially US Airways had various groups that used to operate under the chief executive. Such groups included revenue and marketing group, corporate affairs, and finance, as well as the operations groups. However under the new company, there are no such groups.

There were no major changes in the human resource practices after the merger. The new company, American Airlines Group, adopted most of its human resource strategies from US Airways and retained most of its top managers. The main reason the company made no significant changes in their human resource strategies is due to business reasons.

They wanted to maintain their combined market share where...

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