Assignment 2: Mergers And Acquisitions Due Week 6

Assignment 2: Mergers and Acquisitions Due Week 6 and worth 200 points

Use the Internet to research a publicly traded company in the United States that has undergone a merger or acquisition within the last three (3) years. Take note of the circumstances surrounding the merger or acquisition. Write a four to six (4-6) page paper in which you:

  1. Examine the circumstances that resulted in the merger or acquisition for the selected company. Speculate on two (2) reasons why the resulting decision to merge or to acquire / be acquired was made.
  2. Assess the significant positive (or negative) effects of the merger or acquisition. Provide at least two (2) examples of those effects now that the merger or acquisition has been completed.
  3. Examine the organizational structure that has resulted from the merger or acquisition. Analyze the major differences between the resulting company and the original two (2) organizations.
  4. Determine whether or not the human resources management practices of the company were modified to reflect the outcome of the merger or acquisition. If no changes were necessary, speculate on the reasons why they were not. Provide a rationale for your response.
  5. Use at least four (4) academic quality resources in this assignment. Note: Wikipedia does not qualify as an academic resource.

Your assignment must follow these formatting requirements:

  • Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
  • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

Outline

  • I. Mergers and Acquisition (here is where you provide an introduction)
  • II. American Airlines Buys US Airways
    • A. Bankruptcy
    • B. Competition
  • III. Effects of the Acquisition
    • A. Increase travel for consumers
    • B. Reorganization
  • IV. Organizational Structure After the Acquisition
  • V. Human Resources Management at American Airlines
  • VI. Conclusion

Paper For Above instruction

The airline industry has experienced significant mergers and acquisitions over the past decade, with the American Airlines and US Airways merger standing out as a landmark event. This paper explores the circumstances that led to this strategic move, assesses its effects, and examines its impact on organizational structure and human resource practices.

Introduction

The aviation industry is characterized by high capital costs, intense competition, and fluctuating demand, prompting many airlines to pursue mergers and acquisitions as survival and growth strategies. The merger between American Airlines and US Airways, finalized in 2013, was driven by financial distress, competitive pressures, and the desire to consolidate market share. This strategic alliance aimed to create a stronger, more competitive airline capable of competing with global carriers such as Delta and United.

Circumstances Leading to the Merger

The two primary circumstances that precipitated the merger were US Airways’ bankruptcy filing in 2002 and American Airlines’ financial struggles, worsened by the 2008 financial crisis. US Airways filed for bankruptcy in 2002, citing high labor costs and competitive pressures, but reemerged stronger in subsequent years. Meanwhile, American Airlines filed for bankruptcy protection in 2011, primarily due to high operating costs, rising fuel prices, and intense industry competition. The merger was seen as a way to stabilize operations, reduce redundant costs, and strengthen brand presence.

Two significant reasons for the merger include:

  1. Market Share Expansion: By merging, the combined entity aimed to increase its market share, improve route networks, and enhance bargaining power with suppliers and labor unions.
  2. Cost Synergies: The merger was expected to generate substantial cost savings through route optimization, staff redundancies, and procurement efficiencies, improving overall profitability.

Effects of the Merger

The merger produced both positive and negative effects. On the positive side, it increased competitiveness and operational efficiency. The combined airline improved its route network, offering passengers more direct flights and expanded global reach. This consolidation allowed for better utilization of aircraft and infrastructure, reducing overall operational costs.

For consumers, a key positive effect was increased travel options and reduced ticket prices due to economies of scale and improved service offerings. Additionally, the merger allowed for a unified loyalty program, leading to better customer retention and satisfaction.

However, there were also negative effects. The integration process led to workforce reductions, affecting employee morale and leading to job losses. Furthermore, during the early stages of integration, service disruptions and miscommunications affected customer experience.

Organizational Structure Post-Merger

The merger resulted in a significant restructuring of the organization. The newly formed American Airlines Group Inc. adopted a more centralized hierarchical structure, emphasizing unified management and streamlined operations. Differences between the pre-merger companies included diverse corporate cultures, operational procedures, and branding strategies. Post-merger, efforts were made to harmonize these aspects through unified policies, corporate culture initiatives, and integrated operational systems.

Compared to the separate entities, the resulting organization prioritized economies of scale, standardized procedures, and consolidated administrative functions, leading to a more efficient but sometimes less flexible organizational structure.

Human Resources Management Practices

Post-merger, human resource practices were modified to accommodate the new organizational structure. Redundant positions were eliminated, and integration of staff from both airlines was necessary to create a cohesive workforce. Training programs were implemented to align employee skills and operational standards.

In instances where no changes were needed, it was often because existing HR practices already aligned with the strategic goals of the merged company. For example, both airlines employed similar safety protocols and customer service standards, easing integration. The rationale behind HR modifications was driven by the need to consolidate corporate culture, improve communication, and achieve cost efficiencies.

Conclusion

The merger of American Airlines and US Airways exemplifies how strategic alliances in the airline industry can address financial distress, competitive pressures, and market expansion needs. While the merger has yielded significant benefits in terms of operational efficiency and market reach, it also posed challenges related to organizational integration and employee morale. Ultimately, the success of such mergers depends on effective management of organizational change and human resources, ensuring that the new entity evolves into a cohesive and competitive airline.

References

  • Ghemawat, P. (2017). Redefining global strategy: Crossing borders in a world where differences still matter. Harvard Business Review Press.
  • Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2020). Strategic management: Concepts and cases: Competitiveness and globalization. Cengage Learning.
  • Li, J., & Wang, H. (2016). The impact of mergers and acquisitions on airline performance: Evidence from US carriers. Transportation Journal, 55(2), 163-180.
  • Morgan, R. M., & Hunt, S. D. (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58(3), 20-38.
  • American Airlines Group Inc. (2014). Annual report 2014. Retrieved from https://www.aa.com
  • United States Securities and Exchange Commission. (2013). Form 10-K: American Airlines Group Inc. & US Airways. Retrieved from https://www.sec.gov
  • Smith, A. (2015). The effects of airline mergers on consumers: Evidence from US industry. Journal of Air Transport Management, 45, 34-43.
  • O'Connell, J. F., & Williams, G. (2016). Passenger satisfaction with airline services: A study of US domestic carriers. Tourism Management, 88, 145-155.
  • Wensveen, J. G. (2015). Air transportation: A management perspective. Ashgate Publishing.
  • Wilkinson, G. (2015). Managing organizational change in the airline industry. Journal of Organizational Change Management, 28(4), 548-560.

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