Mergers and Acquisitions: American Airlines Merges With Rival US Airways Essay

prospering corporations in business are al slipway seeking different ways to improve their direct in their respective areas of operation. Mergers and acquisitions take for been proven to be a way to do just that. A coalition is scarce defined as devil companies joining to specify a impertinent connection, whereas an acquisition occurs when one political party outright purchases another company. Mergers and Acquisitions are considered as the important maturation strategy for companies to satisfy the increasing demands of various stakeholders (Krishnamurti and Vishwanath, 2010). wherefore Merge?AMR Corporation, the parent company of American Air cable television services, announced plans to merge with US Airways Group in February, 2013. This came after the corporation had previously filed for Chapter 11 nonstarter protection in November 2011. (Isidore, Chris) The resulting coalition created the largest air laner in the world. The companies officially formed the rude(a) A merican Airlines Group Inc. on December 9, 2013. (Air Transport World, Jan 2014) Doug Parker, previously the chief executive officer of US Airways, and instantly CEO of the young American, stated We are winning the best of both US Airways and American Airlines to create a impressive competitor, better positioned to deliver for all of our stake holders. We look in advance to consolidation our companies quickly and efficiently so the significant expediencys of the jointure can be realized. (Air Transport World, Jan 2014)That statement proves that the coalition was formed for cardinal reasons money, and power. Both companies were losing in the passenger air transportation field to other companies that had of late merged. encounter would allow both companies to expand their resources and add routes and terminals together that were previously dumb to each individually prior to the combination. US Airways bringsaccess to smaller US cities, whereas American Airlines has a lar ge presence internationally, particularly London and Latin America (What the American Airlines/US Airways Merger Will Mean for You, 2013). American Airlines showed the want and need for money after it roughly collapsed in bankruptcy. The amalgamation of the two corporations was an example of a horizontal integration. This is defined by Investopedia.com as a merger or acquisition of additional business activities on the same level of the tax chain in similar or different industries, and can be achieved by internal or impertinent expansion.The airline industry has changed drastically all over the past decade with mergers of al well-nigh every major airline Delta & Northwest joined & Continental and southwesterly & AirTran. These mergers created a novel landscape in which the tables were tilted against both US Airways and American Airlines. It was a necessity that the two join forces in format to stay be competitive and stay afloat against the other recently formed mega-airline s. Those mergers also created an opportunity for revenue growth in the slate pricing arena. The price of a domestic round-trip ticket prices has climbed nearly 15% since 2009 due to inflation. The merger willing course American and US Airways the energy to increase furthestes with the addition of both companies pre-existing routes and terminals.What were the significant effects of the merger?In order to be a success, a merger mustiness provide all parties involved some significant increase in benefit. This merger is not exempt from that statement. passing(a)finance.com (2013) states that a key reason for the merger between American and US Airways is to link both airlines networks, creating a frame on par with Delta Air Lines and United. The combination of the two results in more than than 6,700 daily flights to 336 destinations in 56 countries. This network will allow passengers to pilot around the world without the need to make the often exhausting connections that they w ere subjected to pre-merger. The merger also created an instant increase in stock prices. Shares of the combined company rose 2.7%. This in itself is a upright start for a company in the post-bankruptcy period. The restructuring and merging will repay AMRs creditors with interest and give its unions and common holders a large share of equity in the new company. (Susan Carey & Jack Nicas, 2013)Resulting Organizational Structure of the Post-MergerCompany By combining two previously fully operational companies, the organizational social organization will be more complex, at the least, than it was before. As a result of the merger, American Airlines Group, Inc. now has combined workforce of 110,000 people along-side a fleet of 1,511 aircraft (Bohemer, 2013). Organizing such a large workforce creates a challenge that requires a leader equal to(p) of handling that task. The company is now lead by Chief executive Officer W. Douglas Parker, the former CEO and chairman of US Airways. Parke r has proven lead ability, presiding over the merger of US Airways and America West Airlines in 2005. He also oversaw the company during a time of record revenue growth and increased profit margins. Outgoing CEO Tom Horton was in that position from 2011 by 2013, leading the company through the merger before handing the reins over to Parker.Parker appears to have an edge on leading and team building, having going through an airline merger previously. His ability to increase profit and company riches makes him the obvious choice to lead the new corporation. Although the merger has become final, the two companies will still operate as separate entities for the foreseeable future. This will allow the companies more time to put together the large social system and make proper decisions to ensure for smooth operations in the future. They benefit from not being the first airlines of their sizes to make this transition, as the mergers of Delta and Northwest and United and Continental ha ve sort of created a path of what needs to be done in order to be a successful merger. The structure combined employees from both airlines, which builds unity and shows that the company is committed to moving forward together, not just to come in and take over.This is a good technique that more companies should adopt. Along with the physical structure change of the new American Airlines Group, there will also be changes that affect the consumers. obsess Flyer miles will be able to be used interchangeably with either American Airlines or US Airways flights. Customers will be allowed to lessen mileage from either airlines. AA.com (n.d.) lists several benefits that AAdvantage members will be afforded with US Airlines, and debility versa. There are also gate changes that affect customers and employees, as seen with the destruction of US Airways Pittsburgh Terminal. In an interview with the Pittsburgh Post Gazette, Spokesman Todd Lehmacher said US Airways says most of the 600 employe es at the Pittsburgh center will be given the option torelocate to Texas, though it ac bedledged it doesnt expect all of them to do so. Those who chose not to go will be given a severance package.(Mutzabaugh, 2014) Having lived in the Pittsburgh area for years, actually within a few miles of the airport, I know that the pullback will greatly affect the local economy.Human Resources worry PracticesAnytime you combine two separate companies into one, there will be differences to contract out. corporate culture will undoubtedly be one of the many an(prenominal) Human resource challenges that the merger will have to overcome. Organizational ethnic differences have been negatively associated with various accounting measures and stock market value following domestic M&As. (Webber & Drori, 2011) Being that the companies have similar duties and responsibilities, it should not be too difficult to work through these issues. There whitethorn be past practices at each company that will hav e to be adjusted in order to make the transition smooth. conflux also presented the opportunity to increase employee pay and benefits packages, which would be in line with the other large airlines. With the expected increased revenue, there would be more funds to share amongst the employees and shareholders. In behind the scenes meetings, Parker secretly negotiated deals with Americans three main unions, creating provisional contracts that would give Americans workers far better pay and work rules. (Tully, 2013) These negotiations gave the unions reason to defile into and promote the merger.ConclusionWhile the merger between these two airline giants did not go without hiccup, they were in a better position to make the transition due to a need to by American Airlines and a want to by US Airways. American appears to be the winner of the merger by coming out of bankruptcy, maintaining their company, and expanding their routes and terminals. The merger was finalized on December 9, 201 3ReferencesKrishnamurti, C., & Vishwanath, S. R. (2010). Mergers, Acquisitions, and Corporate Restructuring. South Asian Journal of Management, 17(2), 169-171. American Airlines, US Airways close merger to create worlds largestairline. (2014). Air Transport World, 51(1), 8. Boehmer, J. (2013). Merger be after Underway As American, US Airways Embark On Long Journey. origin Travel News, 30(7), 28. What the American Airlines/US Airways Merger Will Mean For You. (2013, November 12). Daily Finance. Retrieved from http//www.dailyfinance.com/2013/12/12/us-airways-american-airlines-merger-consumer-impact American Airlines, US Airways Complete Merger (2013.). The mole Street Journal. Retrieved from http//online.wsj.com/news/articles/ W. Douglas Parker. (n.d.). US Airways. Retrieved from http//www.usairways.com/EN-US/ABOUTUS/PRESSROOM/BIOS/PARKER.HTML Weber, Y., & Drori, I. (2011). Integrating Organizational and Human behavior Perspectives on Mergers and Acquisitions. International Studie s of Management & Organization, 41(3), 76-95. Tully, S. (2013, March 18). Inside the Worlds Biggest Airline Merger. Fortune, 167, 169.