International Mergers: Etihad Airlines

The Airline industry is a large and constantly growing industry. It facilitates economic growth, international investment and world trade and is therefore central to other industries as well for globalisation. There are various forces which lead to globalisation in airline industry. Key drivers of change are forces likely to affect the structure of an industry; sector or market. (1).

United Airlines and Continental Airlines, two major airlines companies, agreed to a merger that would create the world’s largest airline. Such important deal has a lot of problems to be dealt with, from technical, for example how to put the companies databases together, to more fundamental, like how the company should be ruled.

Cooperation within alliances poses several challenges to managers: the size of the alliance, the need to intensify cooperation and the harmonization and standardization of common processes, and the search for synergies to reduce costs. However, in times of crisis, alliances do not necessarily prevent stiff competition between the partners. At present, five alliances – One World, Star, Wings, Sky Team and Qualiflyer stand out as the core groupings around which other airlines with strong regional networks will come together to form worldwide networks and can be described as global alliances. But they remain fragile creations subject to competing attractions and economic forces. Over the years, several companies have switched from one alliance to another. Austrian Airlines, for example, moved from the Qualiflyer to the Star alliance. Air France has recently floated the idea of creating a Mediterranean alliance with Alitalia and Iberia. To make this three-way deal possible, Iberia would have to leave the OneWorld alliance.

The combined United Continental Holdings competes on the basis of having what it terms "the most comprehensive global route network", modern planes, and "an industry-leading loyalty program" (UnitedContinentalHoldings.com, 2012). The merger between two struggling airlines was announced in 2010, and the United brand is going to be the one that is most prominent going forward. There have recently been some minor implementation problems in unwinding the Continental name (Martin, 2012).

Working beneath the American Airlines name, a standout amongst the most perceived brands on the planet, the consolidated aircraft will have a vigorous worldwide system and a solid money related establishment. The merger will offer advantages to both carriers' clients, groups, workers, financial

The risk of entry into the airline industry by potential competitors is low due to the “liberalization of market access, a result of globalization. According to the IATA (International Air Transport Association), about 1,300 new airlines were established in the last 40 years,” (Cederholm, 2016). The cost structure of businesses in an industry is a determinant of rivalry. In the Airlines Industry, fixed costs are high, because before the organization can make any sales, they must invest in air crafts, fuel and service employees. These items come attached with hefty price tags. Industries that require such enormous amounts of start-up capital as predicted by many analysts

Five major passenger airlines dominate their industry by size (Grant, 2013, p. 479). But their size, legacy costs and hub and spoke business model created significant exit barriers (Grahm & Vowles, 2006, p. 108). New competitors not only started with no entry barriers but also few if any exit barriers. Legacy carriers had to identify new innovative strategies to augment their core business models to profitably compete.

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).

Market structure can be defined as patterns of behaviour by enterprises in an effort to adjust to the markets in which they operate (buy or sell). Pricing strategies and collusive behaviour mergers are a few dimensions of market conduct. It is the industry norm for a legacy carrier to offer service to most popular destinations; Delta reducing routes to a similar schedule as the low-cost airlines is not an option in the multi-billion dollar industry. In order to gain market share from low-cost airlines, Delta must create a value proposition that differentiates itself from its competitors. Many customers will pay a premium if the level of service provided is higher than the low-cost, no-frills

As it has been anticipated for two or three years now, American Airlines and US Airways as of late reported the goal to blend the two transporters into a super aircraft that would turn into the world's biggest. It is nothing but the same old thing new to numerous explorers who have experienced the Delta-Northwest merger, or the United-Continental merger, or the endless mergers and acquisitions that have now focused more than 70 percent of residential flights into only four organizations.

The airline industry can be considered an imperfect oligopoly. There are several large carriers that dominate long distance flights, and many small carriers that compete for short distance flights. Competition is fierce, and the return for most carriers is very low. Some airlines are trying to differentiate themselves, like JetBlue for example, by offering superior services at low prices. Other low cost airlines, like Southwest, offer low costs with no frills. Most airlines offer a frequent flyer programs in order to develop brand loyalty. In recent years there has also been several alliances formed between airlines. These alliances enable

Etihad Airways is committed to the growth strategy of cooperation to get the scale needed to compete in the global air transport market. Beyond organic developments, the airline has a strong base of code-share partners, offers access to hundreds of destinations that are not served by its own aircraft. In 2013, Etihad Airways has signed a new code-sharing agreements with seven airlines - South African Airways, Kenya Airways, Air Canada, Korean Air, Air Serbia, Belavia and airBaltic. Code-sharing refers to a practice where a flight operated by one airline is jointly marketed as a flight for one or more other airlines.

Due to the fact that the people of Great Britain were interested in some of the most exotic locations in the world, British Airways has always tried to deliver routes that can take passengers from Heathrow to any destination in the world. However, any of these routes are unprofitable, and sense the government was no longer subsidizing the airline as heavily, new means of finding and maintaining these routes had to be explored. In recent years, British Airways, and other airlines, have realized that to maximize the number of destinations that they could service, they had to work together. In some cases this meant merging with other airlines, but for many airlines it meant that exclusive partnership agreements were reached that would allow customers to reach a destination flying different airlines, but with a lower cost because of these types of agreements. British

Competing through alliances in the airline industry: The AIR FRANCE- KLM/DELTA AIR LINES JOINT VENTURE

The Global Airline Alliances is an important part of the airline business industry in the 21st century, this includes: the increase of airline performances, provides great benefits for the employees, customers and for the marketing industry. There are three main alliances in aviation today, this includes, Star Alliance, Oneworld and Skyteam.