February 13, 2014

Mergers and Acquisitions

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Bus 508: Contemporary Business

American Airlines Group

The American and international industry identifies one of the most volatile and competitive industries in the United States and the world. This necessitates incorporation of various strategic decisions aimed at enhancing an airlines position within the market as both a market leader and trendsetter within the industry (Collan & Kinnunen, 2011). Moreover, airlines incorporate strategic decisions geared towards attracting new and larger markets through provision of effective and efficient airline services that meet the growing demand. One of the most popular and effective strategic decisions incorporated by airlines within the United States and around the globe is incorporation of mergers and acquisitions (Straub, 2007). Mergers enhance the existent position of either company as it creates a stronger financial base for the merging companies through an increase in revenues realized together with a reduction in the operational costs incurred. Moreover, the merger creates a stronger market position for the merging companies, as they are financially able to delve into new markets through identification of the existent market needs pertaining to the services offered by the airlines (Rumgarilseva, 2002). Furthermore, a merger provides a larger customer base for the merging companies as they combine their customer base thus acquiring more revenues. Moreover, development of a merger seeks to identify the growing status and strength of the company, which works to increase the customer loyalty realized and consequently increasing the customer base. This strategy has been adopted by both the US Airways and American airlines in developing a merger to form the American Airlines (Straub, 2007).

Formed in December 9th 2013, the American Airlines developed from a merger between US Airways and American Airlines. The merger negotiations were initiated in...