American Airlines and US Airways merger
Use the Internet to research a publicly traded company in the United States that has undergone a merger or acquisition within the last three (3) years. Take note of the circumstances surrounding the merger or acquisition. Write a four to six (4-6) page paper in which you: Examine the circumstances that resulted in the merger or acquisition for the selected company. Speculate on two (2) reasons why the resulting decision to merge or to acquire / be acquired was made. Assess the significant positive (or negative) effects of the merger or acquisition. Provide at least two (2) examples of those effects now that the merger or acquisition has been completed. Examine the organizational structure that has resulted from the merger or acquisition. Analyze the major differences between the resulting company and the original two (2) organizations. Determine whether or not the human resources management practices of the company were modified to reflect the outcome of the merger or acquisition. If no changes were necessary, speculate on the reasons why they were not. Provide a rationale for your response. Use at least four (4) academic quality resources in this assignment. Note: Wikipedia does not qualify as an academic resource. Your assignment must follow these formatting requirements: Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions. Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
Mergers and Acquisitions: American Airlines and US Airways merger
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Mergers and Acquisitions: American Airlines and US Airways merger
Circumstances of the merger
American Airlines and US Airways merged to form the largest airline in the world, with the shares of the formed company trading under the name American Airlines Group Inc. (AAL) (Martin, 2013). US Airways is owned by US Airways Group while American Airlines is owned by AMR Corporation. Interests of merging with AMR Corporation were first expressed by US Airways Group in January 2012 and the CEO of AMR Tom Horton agreed to the merger negotiations. There are a number of circumstances which can be cited as the main reasons that contributed to this merger. First, American Airlines had filed for bankruptcy protection in 2011 and the management had announced that it was looking for a merger partner.
Second, Mr. Doug Parker, the CEO of US Airways had campaigned vigorously for the merger. He tried to convince the creditors, labor unions and the management of AMR about the necessity of establishing a huge airline that has the capacity of competing with the other two U.S. airline giants (United and Delta) that had expanded through mergers (Carey & Nicas, 2013). He gave an example of United Continental Holdings Inc., Southwest Airlines Co. and Delta Air Lines Inc. which all had merged with different airlines and currently manages over 80 percent of domestic capacity in the U.S. Another important reason of merging the two airlines is increasing revenues and cutting on operational costs. According the Parker, merging the two companies would yield over $1.5 billion per annum and this made the U.S. Airways and American Airlines to sign a nondisclosure agreement on August 31, enabling them to discuss the possibility of merger.
Effects of merger
The American Airlines-US Airways merger created the largest airline in the world, a position once held by American Airlines (AA) before a wave of consolidation that occurred over the past in the airline industry. The merger will also make AAL to operate close to 6,700 flights daily to over 330 destinations spread across more than 50 nations (Maynard, 2013). Currently, the two airlines has employed more than 100,000 workers spread across the world. Melendez (2013) says that the merger would be a bad deal for customers, especially the frequent fliers. This is because airfares are projected to increase due to reduced competition, customer choice will be reduced, overcrowding on aircrafts will increase and some employees may lose their jobs. The ability of low-cost airlines to discipline the amount of fares will be compromised. Moreover, it is expected that some hubs such as Phoenix will either be downgraded abandoned all together.
Moreover, 70% of the air travel market in the U.S. will be controlled by only four firms, including Southwest, Delta, United-Continental and AAL. It is expected that low-cost carriers such as Sprite Airlines and JetBlue will control less than 20% of the airline market (Melendez, 2013). Moreover, consolidation in the airline industry will lead to an emergence of a market structure that fails to provide enough competition to reduce harm to consumers. However, there are positive impacts from the merger. Tom Hoban, who is an AA pilot says that the merger will be good for customers since it will address shortcomings in AA in terms of network size and the number of routes. The management expects that the effects of the merger would lead to a projected revenues of $40 billion from serving over 187 million clients (Koenig, 2013). Moreover, the merger will enable business travelers of AA to access addition...