American Airline Mergers

At the onset of the airline industry in the United States, major network airlines were the sole providers of air travel. This multifaceted industry was a difficult industry to break into as a consequence of “sophisticated customer segmentation, hub-and spoke models and costly information systems for reservations, fare wars and intense competition” (Thompson 2008). Shrinkage in airline ticket prices augmented the demand for airline travel. Many markets were simply deserted or over-looked by major network airlines; this is a region a fresh “second tier of service providers” could enter into. This endeavor proved to provide a consumer savings of billions per year. Thus in June of 1971, after a tumultuous battle with other Texas-based

American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.

1. There are a few trends in the US airline industry. One is consolidation, wherein existing players merge in an attempt to lower their costs and generate operating synergies. The most recent major merger was the United Continental merger, which is still an ongoing affair, but has created the largest airline in the United States by market share (Martin, 2012). Another trend is towards low-cost carriers. In the US, Southwest has been a long-running success and JetBlue a strong new competitor, but in other countries this business model has proven exceptionally successful. The third major trend is the upward trend in jet fuel prices, and the increasing importance that this puts on hedging fuel prices and capacity management (Hinton, 2011).

The domestic US airline industry has been intensely competitive since it was deregulated in 1978. In a regulated environment, most of the cost increases were passed along to consumers under a fixed rate-of-return based pricing scheme. This allowed labor unions to acquire a lot of power and workers at the major incumbent carriers were overpaid. After deregulation, the incumbent carriers felt the most pain, and the floodgates had opened for newer more nimble carriers with lower cost structures to compete head-on with the established airlines. There were several bankruptcies followed by a wave of consolidation with the fittest carriers surviving and the rest being

In February 2013, American Airlines and US signed the deal worth $11 billion and officially announced to merge two airlines. The new merged airlines would be the world’s largest airline under American Airline name, and it would rename the new corporation as American Airlines Group Inc. Internationally, it would have 100,000employees serving mostly 6700 flights to over 330 destinations in over 50 countries daily after the merger. Also, it planned to have new delivery of 517 narrow body and 90 wide body aircrafts. More specifically, the AMR Corporation’s stakeholders would take 72% of company shares, and US Airways shareholder will take the rest of 28 % company share.

In February 2013, US Airways and American Airlines came out with an official statement concerning their plans to merge into a single airline. The new company would be managed by the majority of the administration of US Aiways whilst retaining the name of American Airlines. Once sealed, the deal would result in the shareholders of American Airlines owning 72% of the company, leaving the 28% to the stakeholders of US Airways.

The merger between American Airlines and U.S. Airways is one that can be explained using static game theory models. The two players in the game would be American Airlines and U.S. Airways. Each one of the players would have something to gain from the merger, but they would also have something to lose. In this game American Airlines is our first player. American Airlines’ potential payoff is merging with a company that is maximizing profits, but is also lacking in the customer service department. U.S. Airways is player two, and in this game they are merging with a business that is suffering from chapter 11 bankruptcy, but is excelling in customer service.

United Airlines, Inc., commonly referred to as united, is the fourth largest airline in the United States and one of the largest airlines in the world. It is one of the world's largest airline when it comes to number of destinations served, and the second largest when it measured by scheduled passenger-kilometers flown. In the late 1920s, Boeing Airplane Company and Pratt & Whitney joined forces to form United Aircraft And Transportation Corporation. The main purpose of the creation of this company was to transport mail to various cities by air. Around July 1, 1931, the United Airlines holding company established an operating division and the company itself established United Airlines, Inc., in Chicago, Illinois.

American Airlines has become the nation’s dominant air carrier after merging with US Airways and many have declared that the 787 is a critical next step in the modernization of American Airlines as a company. A while back American announced that flights will begin May 7 between Dallas-Fort Worth and its hub in Chicago, and beginning June 2 between Dallas-Fort Worth and Beijing. On June 4, American will fly the Dreamliner between Dallas-Fort Worth and Buenos Aires, Argentina. American said it will add more 787 routes this year as the new aircraft arrive, but they gave very little clues on what the future holds. "As we take delivery of the 787 and all of our new aircraft on order, we will continue to assess our network to determine which

Americans next largest competitor soon followed with their own merger a year after the Delta airline merger. In 2010 United Airways merged with Continental Airways. With this merger, United now owned and controlled an estimated 21 percent of the seats within the US market according to the Wall Street Journal. Also in the article, the author estimates that because of the merger, the combined carriers would generate around $1 to $1.2 billion in net annual synergies. This number would include around $800 to $900 million in revenue gains and $200 to $300 million in cost savings by the year 2013. Besides government regulation, the two firms had issues before the merger was even announced to the public. Two years prior to the 2010 merger, United

Being the largest airline in the world comes with some significant advantages, one of the most important is a physical presence in the locations that passengers want to travel. As part of the anti-trust settlement, American Airlines agreed to sell approximately 15% of their takeoff and landing slots in Washington D.C. and New York . Even with this sale of slots, American Airlines is still able to offer flights to over 250 destinations daily. Just by their sheer size, American Airlines should be capturing a significant share of the market.

The key issues that are behind the American Airlines and U.S. Airways merger is that when it all comes down to it is that once these two companies are combines they will be better able to offer its customers better options according to Thomas C. Lawton (2013). However, since two companies are becoming one the critics will argue that there will be less competition in the airline industry especially since there seem only to be four major airlines now, Delta, American

American Airlines Group Inc. (AA) is the largest airline in the world. They seek to be an effectiveness organization that have better customer service, effective staff, and successful. In the following, the five stages of Organization Development process will use to implement the organizational development change process for the new “American Airlines Group Inc.”:

The Risk of Entry by Potential Competitors – Since the deregulation of the airline industry in 1978 over 1,300 new airlines have opened for business. However, most now are bankrupt or merged with the other carriers to stay workable. The established giants were Delta (merged with Northwest), American Airlines (merged with U.S. Airways), United Airlines (merged with Continental), and now Alaska Airlines (merged with Virgin America). Now the Low-Cost Carriers (LCCs) are posing a massive threat which includes Southwest Airlines (merged with Air Tran), and JetBlue.

International mergers have been frustrated for years in the airline business where there are in excess of 200 national carriers conveying passengers across the world. Bans on foreign ownership and lingering government control over routes, flights and slots at major airports prevent international mergers and limit the ability of airlines to enter new markets. The incentive for mergers is to grow revenue and reduce costs to become even more competitive by reducing fares. This frustration has to a certain extent been overcome by super-alliances between national carriers operating out of international 'hubs' like Amsterdam, Buenos Aires, Chicago, Copenhagen, Hong Kong, London, Paris, Rome and Tokyo. Major airlines have grouped together with names like One World, Star, Delta and KLM/NW to sell tickets to a wider range of destinations without flying to more. They also draw on the 'spokes' of each member airline's associated companies operating out of other airports in the member's country to the hub. Partners in an alliance sell each other's flights, and even book blocks of seats on each other's aircraft.