Executive Summary 1. Introduction This comparison between American Airlines (AA) and US Airways

Delta’s Management team is seeking to strengthen the company’s market and financial position by proposing to acquire American Airlines. An assessment of American Airlines business operations, its resources and environment will identify the company’s operational and financial strengths, weaknesses, possible opportunities and threats. This will enable Delta to recognize the best strategy to create the most effective synergy for this acquisition. Evaluating the SWOT analysis on American Airlines is a core requirement and a key step to assessing the feasibility of the acquisition; detecting its operational and financial factors could have a profound effect that can assist Delta in determining the strategic direction that would be advantageous to the company.

Overall, the five forces model suggests that the overall intensity of competition in the airline industry is likely to be severe. Back in the early 1980 's competition was very intense. During the late 1980 's the monopolization of major routes by a few major carriers, the limited availability of free landing spots at major hubs and the emergence of limited brand loyalty and tacit price agreements have all helped reduce the intensity of competition. However, as already mentioned, slumping demand in the early 1990 's plunged the industry once more into a severe price war. Airline travel is a commodity-type product, with limited potential for differentiation.

While it is difficult, to some extent, to evaluate the success of a merger that is only just now entering its final implementation phases, it is known that the objective of that merger was to use the larger route network to attract more business, and that the combined airline would also extract cost savings as the result of increased operational efficiency. The airline had struggled in 2009, with its sales declining, but it recovered in 2010 and 2011. Sales last year were $33.678 billion, up from $21.068 billion the year before. In the past two years, the company has turned a profit, going from $253 million in net income in FY2010 to $840 million in net income in FY2011. Some of this improvement may stem from the impact of the merger. However, the airline industry is highly cyclical, and the past two years have represented economic improvement. Likewise, the losses the company faced in FY2008 and FY2009 were as much the result of the economic downturn as they were internal business factors.

As I was thinking about the two companies that I wanted to do for my course project on, I began to research companies on the internet and I ran across the merger between United and Continental airlines. The reason that I choose to do the merger is because I knew that they were going to go through many changes within this merger. Both airline companies have a lot to offer to each other with this merger that they can compete with Delta airlines one of the largest airline in the world. This merger will bring about several changes within both companies. In this paper I will be providing the different changes between both companies with the merger including the culture, systems and unions. Since they were two different companies

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 report finds that Delta Airlines has successfully emerged from its bankruptcy in 2005 to report successful returns in both 2007 and 2008. With its 2008 acquisition of Northwest Airlines Delta became the world's largest airline, further improving its position in the airline industry. Despite this current positive position report also finds potential adversities

American Airlines Group (AAG), headquartered in Fort Worth, Texas, is largest airline company in the world by fleet size, revenue, number of destinations served, and scheduled passengers-miles flown. Operating a total of 6,700 flights daily, while utilizing over 900 aircrafts, American Airlines flies to approximately 350 destinations in 50 countries. Though AAG’s revenue comes from many sources, including airline ticket sales, cargo, baggage fees, credit card fees/interest, and in-flight purchases, ticket purchases provide their highest source of revenue. Operating in both Mainline and Regional outlets, to major, secondary, and tertiary airports, AAG gives all customers the opportunity to fly virtually anywhere they desire. One notable event also affecting production efficiency, as well as other economic ratios from 2013-2016, was their $11 Billion merger with USAir on December 9th, 2013.

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

bankruptcy protection bigger and better than ever. It also solidified American Airlines as the largest airline in the world. This merger has become to cornerstone of American Airlines affecting all areas of the organization both internal and external.

American Airlines had been the largest airline in the United States for a long time. In 1990 and 1991 due to a recession and the Gulf War, demand for air travel dropped drastically, for this reason, fare wars started and all the airlines incurred massive losses.

It is very important that SkyWest stay ahead in terms of being competitive regarding the industry’s key success factors. As noted in Exhibit 6 brand image is an important factor in the key success model. SkyWest’s current engine upgrade plan will enhance reliability in their fleet which will help boost the way passengers and investors view the company. One factor that could have a negative effect is the recent acquisition of Atlantic Southeast Airlines and Express Jet. Both companies have been known to be poor performers in the industry. SkyWest must successfully merge their operations in order to boost performance across their entire business operation.

The airline business is a highly competitive industry. According to Morningstar article Southwest Airlines Co Analyst Report, the airline industry has many barriers to entry, which creates an intense industry rivalry. This claim is backed up by the text Attention All Passengers by William J. McGee, which states “Air travel has become a commodity, and the airlines themselves an oligopoly.” (McGee) Therefore, a sustainable cost advantage is the only way to survive in this cutthroat industry. (Dihora) Furthermore, the same Morningstar article claims that the airline industry is not growing. This is because the top four airline carriers control approximately 80% of the domestic market in 2015. This can be compared with results from the year 2000, when around 9 carriers controlled as much. (Dihora) This statistic shows that the number of organizations in the market is in fact

The Airline Industry is in an interesting situation. Simply adding a low cost alternative is not enough in the industry. The Internet has made the power of buyers grow with the transparency of ticket prices. This is not something that will change any time soon. Because of this profitability is predominately reserved for low-cost yet distinctive carriers. No consumer wants to ride what they consider a “lesser” airline. Airlines need a way to distinguish themselves from one another while also acknowledging the increased power of buyers.

On April 4th, 2016, Alaska Air Group, Inc. announced that it had agreed to a merger agreement with Virgin America Inc. Alaska Air agreed to pay $57 per share in cash, for a total of around $2.6 billion. After taking into account Virgin’s operating leases, Alaska Air will pay $4 billion dollars to acquire Virgin. Upon completion of the acquisition, Alaska Air became the 5th largest U.S. airline, surpassing JetBlue in terms of ASM (available seat miles). Given that both airlines focus on the West Coast, this deal strengthens Alaska Air’s West Coast presence, positioning the company well to dominate this geography. However, while there are certainly strategic benefits of the transaction, an analysis from both buyer and seller perspectives reveals significant downsides as well.