Evaluation of the Pending Merger of American Airlines and US Airways - Research Paper Example

? Evaluation of the Pending Merger of American Airlines and US Airways Evaluation of the Pending Merger of American Airlines and US Airways Introduction Recently, mergers of airlines have been on the rise across the globe with a n umber of airlines coming together. Currently there is a pending merger of American Airlines and US Airways which is projected to affect American airline networks and operations in different ways. This paper gives and evaluation of the prospected merger of the two airlines and what it entails in the airline marketplace especially in the United States of America. The Pending Merger of American Airlines and US Airways U.S. Airways and American Airlines are set to merge so as to form the largest airline across the entire globe. There is a proposal to settle the matter with Justice Department over an antitrust lawsuit on their merger which is projected to cost US$17 billion (Johanson, 2013). Assent of the plan to merge the two airlines is seen as a potential for resolving competition issues while at the same time contribute to creation of the largest global airline. An in-depth evaluation of the planned merger indicates that there are certain things which are pertinent in case a settlement of the matter happens. One of the prospected outcomes from the pending merger of the two airlines is that more slots for airports will be experienced for cheaper carriers in the American airline market. The two airlines will have to separate slots and facilities relative to airline costs to realize improved competitive advantage in airline industry (Feldman, 2013). This implies that the merger will lead to co-ordination that will see it control at least 80 per cent of American commercial market in airline business network. The merger of the two US airlines will also gain slots for cheaper carriers across the US. This is because the merger will ensure provision for incentives and investment ability to low-cost carriers and further make them gain potential to compete in a more extensive way in both national and international airline markets. Still in regards to low-cost carriers, the merger has capacity to bring a shift of airline industry’s landscape. Moriarty (2013) states that by ensuring a greater decent footing for ease bearers at key US airstrips, this settlement guarantees air transport travelers that they will see more rivalry on persistent and interfacing tracks all around the nation. Therefore, there will be increased competition in American airline industry which will then benefit millions of airline customers following improved airline travelling options and reduced travelling costs in the airline industry. Other airline players such as JetBlue and Southwest Airlines will have an opportunity to gain in the airline industry (Portillo, 2013). This is because American and US Airways will leave out some slots as well as facilities in various airports. This will at the same time increase competition in the American airline business market. Settlement of the merger is also deemed to bring disruption in the mutual relationships that have always existed among legacy carriers. Furthermore, it will increase accessibility to major airports which have previously had cases of congestion. There will also be provision for varied choices to the airline consumers while also enhancing airline fares accruing from increased competition in the airline industry on all national flights in the US (Feldman, 2013). Some of the already existing airlines will win big from the Justice Department on divestiture settlement process since they presently operate on leasing out of slots from American Airlines. Other airlines also stand chances to have their shares in the American airline market rising. The pending merger will see the New American airline becoming the largest global carrier. It will actually be the leading carrier in the world with regards to offering more comprehensive networks across the globe (Johanson, 2013). The same will be true with their services in terms of business excellence and performance which will be attributed to partnership of two successful airline players in American airline industry. Even though there will be more vigorous competition in the American airline market, the new American Airline will have to work aggressively to ensure it gains competitive advantage in the ever changing airline market both nationally and in the international front. The merger is also projected to increase revenues of the new airline in which more than US$1 billion is expected to be generated annually from the year 2015 (Moriarty, 2013). However, there are no expectations to have employment in the new airline affected in any way. This is because the merger will bring human capital from the two airlines on their employment board. There is possibility that the new airline will transform into the world’s largest carrier in which its operations across the globe will be 56 countries while serving at least 336 destinations. Moreover, it will offer daily flights of over 6,700 in number thereby making it more convenient and attractive for companies which seek direct flights for employees across the world (Portillo, 2013). This will enhance links of American airways operating in smaller cities to international network. The merger is also expected to win more shareholders, international regulators and creditors upon its inception which will also see it leave out some rights and slots at some major airports (Feldman, 2013). However, the new American Airline will have to maintain its hubs in most cities for at least three consecutive years. This will mean that it also maintains its American participation in key alliances which bring together other global carriers while also allowing its customers to earn miles and redeem them from other airlines in partnership. Finally, the merger of the two airlines will mean American flying public will gain following changes which the merger will bring into the American airline industry (Moriarty, 2013). Passengers with tickets belonging to US and American Airways cannot fret just immediately following the planned merger. This is because the two airlines will probably bring together miles into single program which will consider status of the elites as well as other pertinent concerns for the two. However, following the recent rush which has been associated with the airline industry of mergers, more competitive airfares and varied choices will have to be looked into with care (Johanson, 2013). This is especially in regard to recent rise in domestic airfares. But the fact is that the pending merger will give the new airline capability of raising airfares. This will make its rivals in the market to raise fares as well. Conclusion Therefore, it is not clear if increasing of low-cost airlines will bring down prices even with the new American Airline. Last but not least, the pending merger of American Airlines and US Airways will bring many changes in the American airline industry. This will be felt not only in the pricing systems, but also in the way airline services and operations will be carried out by different players in America’s airline industry. References Feldman, B. (2013). U.S. Airways and American Airlines Are Merging. The Wire. Retrieved on 23rd November, 2013 from http://www.thewire.com/national/2013/11/us- airways-and-American-airlines-are-merging/71534/ Johanson, M. (2013). American-US Airways Merger: 5 Things to Know About The Preliminary Deal. International Business Times. Retrieved on 23rd November, 2013 from http://www.ibtimes.com/american-us-airways-merger-5-things-know-about- preliminary-deal-1467542. Moriarty, R. (2013). Merger of American, US Airways not expected to boost air fares in Syracuse. Central New York. Retrieved on 23rd November, 2013 from http://www.syracuse.com/news/index.ssf/2013/11/merger_of_american_us_airways_not_ expected_to_boost_air_fares_in_syracuse.html. Portillo, E. (2013). Business leaders: US Airways merger may bring Charlotte more international flights. Charlotte Observer. Retrieved on 23rd November, 2013 from http://www.charlotteobserver.com/2013/11/13/4463653/business-leaders-hope-to-see- more.html#.UpB3fHBkPT4. Read More