United-Continental Meerger

Two of the largest competing airlines in America may seem to have a lot in common to a consumer’s eye: big commercial planes, friendly staff, one free carry-on bag, complimentary snacks. Maybe the biggest comparison of them all is how much of the airline market these two companies take up. But for every similarity, there must be a difference. Beyond contrasting ticket prices, there are many fronts on which to compare Southwest Airlines and American Airlines. To begin when the companies began, American Airlines was established approximately 40 years sooner than Southwest Airlines as a result of a merger. In terms of people, Southwest Airlines currently has just about half the number of employees that American does. However, to truly compare the two companies, the organization itself must be researched and analyzed. Southwest Airlines and American Airlines appear to be very different to this day in terms of organizational culture, team dynamics, and conflict and negotiation.

Before David Neeleman’s non-compete agreement with Southwest Airlines expired, he envisioned the concept of starting a low-fare airline that would combine common sense, innovation, and technology and bring the humanity back into air travel (Gittel & O’Reilly, 2001). In 1998, JetBlue was born. In order for David to fulfill his goal of a “do-it-right” kind of airline, he needed to recruit superior industry veterans who were willing to start from scratch and place an emphasis on employees and customers. Each of these individuals, from the President, General Counsel, CFO, and the HR director, wanted to create an airline that was fun, had

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.

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

In 2005, US Airways and AMR publically proposed a merger that was met with a great deal of resistance. The government has the responsibility to regulate mergers to ensure the merger doesn't violate antitrust laws. This merger had to be reviewed by several agencies such as the U.S. Justice Department, the U.S. Department of Transportation, the Air Transportation Stabilization Board, the Security and exchange commission, and U.S. Bankruptcy Courts. This was a very high profile merger proposal and it was met with a great deal of opposition (Cobb, et al., 2006).

The airline industry is one of the largest and most innovative industries within the United States. Aside from the innovations for which it is reputable and which changed the world the US airline industry is also notable in terms of the developments registered at the level of collective bargaining. The lines below reveal a brief time line of the events after 1978:

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

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

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

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 States airlines are currently enjoying a boom due to streamlining over the past few years, streamlining that included mergers and acquisitions. The streamlining was because of many carriers going bankrupt in the last decade, a situation that was attributed to generous base pay rates and work rules negotiated by the unions as a result of previous good profits. The current boom is also tempered by fractious labor relations between the airlines and staff. Delta Airlines suffered from their pilots picketing in 2016. Southwest pushed back purchase of new airplanes partly because of tensions with its pilots. This is despite the two airlines having a history of good labor relations where they have awarded good remuneration to their workers, relations that have made them some of the most financially successful airlines in the world (Bhaskara, 2016).

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

The Airline industry has experienced continual problems with rising costs with both fuel and maintenance which has caused them to increase their fees to the consumers to pay for those rising costs. This paper will help explain what an airline such as Delta does to help alleviate such costs without forcing its consumers to flip the bill through high fees that consist of tickets, baggage fees and food. The costs of doing business in aviation today have spiraled out of control making it very expensive for both airlines and the

In the last decade, Continental Airlines has had a spotty track record. The airline twice filed for bankruptcy, realized diminished performance culminating in a $613 million loss in 1994, and was ranked dead last in industry indicators such as on-time performance among the major carriers. During these years, employees at Continental had undergone several series of layoffs and withstood both wage cuts and delayed wage increases in an effort to slash Continental’s costs. The result of these efforts was a demoralized workforce and a corporate reputation that put Continental near the top of Fortune’s list of “least admired” companies.