Investigating The Logic Behind Mergers And Merger Between The Us Airways Group And The Amr Corporations Essay

According to the researchers the increased value results from an opportunity to utilize a specialized resources which arises solely as a result of the merger (Jensens & Ruback, 1983; Bradle, Desai and Kim , 1983). For creating operational and financial synergies managers believe that two enterprises will be worth more if merged than if operates as two separate entities. Thus, the two companies, A and B:

In addition, like any other merger between two firms, companies benefit from significant cost synergy during the implementation of an acquisition and/or merger with other company. For example, when two companies combine their strengths to complement each other, they restructure their operations and as a result several offices and sites are closed down which leads to the laying off of employees, consolidating services and software applications. All these changes, result in synergy savings for the new company.

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 Airlines based on my analysis are above average than their competitors in the airline industry. Overall, the airline is known to be most profitable but also falters compared to their rivals in the industry. Research showed that the airline recently filed for bankruptcy after their merger with US Airways. Even though the merger is a good business aspect it hampered the business revenues. On the other hand, as the company improve the aspects that continues to threaten them, they have a hard time addressing what matters to them most. Customers have been complaining more about American Airlines than any other company with this issue. This may have a big impact on the standing of this company. Customers will then turn their back on the

American Airlines Group (AAG) vision is to become the largest and most profitable airline in the world. In 2013 a merger with U.S. Airways was announced and that vision can now become possible. The merger has opened many doors and provides an extensive operational network. They are committed in providing the highest quality service to every individual in the world. American Airlines provides continuous efforts of modernization of their fleets as well as maintaining a position as the largest air carrier in the world. Even with the competition intensifying, there are continuous efforts to distinguish themselves by offering three levels of flying class services. With the different types of flying classes, American Airlines Group

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.

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.

When the merger was officially made, passengers including those who travel extensively for business, have been troubled with taking longer to get to their destination due to connecting flights and using different airlines such as Frontier, Spirit or Southwest. United slashed two-thirds of its flights and drop 39 nonstops and cut approximately 18% passenger totals at the airport, leaving much room for rising competition between the other airlines.

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

In the Airline industry, most of the capital goes to its Aircrafts. Aircrafts cost several millions of US Dollars. It can be purchased brand new but usually it is bought as reconditioned units. Purchase can be through installment or through lease. Even if the Company wants to serve more air routes, they are limited by the number and capacity of the Aircraft they have. The Airline industry is in stiff competition due to the parallel competition in Tourism. That is why every Airline company is compelled to always upgrade and increase their Aircrafts or they will be pushed out of the market. If the company lacks capital and investors to do so, they will forced to either sell part of their ownership or sell its total control to Bigger and more stable companies.

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.”:

Outline the stock market theory of merger and set out its predictions about the effect of merger on post-merger profitability. What does the empirical evidence on mergers show about the gains from merger? In light of your analysis what policy recommendations would you make for policies to control mergers and take overs.

M&A are often conducted for the strategic advantages that it entails such as improvements in efficiency, performance as well as synergistic gains (Junior et al, 2013). The potential source of synergies motivates firms to engage in M&A where they believe the value generated from this strategic combination exceeds the respective individual firm value if they were to operate independently (Duksaite and Tamosiuniene, 2009).

Merger simply can be defined as the combination of two or more similar size business entities into one company. Generally, the main aim of the mergers, which are basically a corporate strategy, are acquiring market share with the way of restructing companies to meet requirements in global competition. Prevalent objectives of the Mergers can be mainly counted as improvement of the profit, eliminating competition, utilization of existing resources and reducing tax burdens. However, it should be considered that, merger is a strategic tool for companies to reach their business objectives. Thus, reasonings of the mergers can very from business sector to companies ' priorities.

13 Non Value Maximization Motivation Theory 14 Value Maximization Motivation Theory 17 vii    Justification of Mergers 24 Who Gains From Mergers?