American Airlines and U.S. Airways Merger Essay

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AMERICAN AIRLINES AND U.S. AIRWAYS MERGER

PLEASE ASSIGN THIS PAPER TO BETTY 2115322 QUESTION MUST BE TYPED IN BOLD AND NUMBERED Assignment 2: Mergers Acquisitions Due Week 6 worth 200 points Use Internet research a publicly traded company United States undergone a merger acquisition (3) years.

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.

American Airlines parent company AMR Corporation had filed for bankruptcy in 2011 because of high costs of leasing aircrafts and labor Soyoung Kim, Feb 14, 2013.

American Airlines had an option of merging with another airline even though it had filed for bankruptcy. The parent company could not service its debts and creditors had no way of recouping their money. American Airlines had a large fleet and this made the airline suitable for a merger or acquisition. U.S. Airways was willing to merge with the airline, as this would allow the airline to increase its fleet and destinations. The experienced American Airlines staff and management would provide U.S. Airways with valuable knowledge and improve on its overall operations. The decision to merge with U.S. Airways was part of American Airlines restructuring plan after it filed for bankruptcy. The restructuring would allow the airline's stakeholders to own 72% of the new company while the shareholders of U.S. Airways would own 28%.

American Airlines filed for bankruptcy after it suffered huge losses since 2001. The company initially intended to perform restructuring without any merger, and this is why American Airlines refused the initial merger proposal from U.S. Airways. U.S. Airways had to involve the labor unions and creditors of American Airlines in the second merger talks. This convinced American Airlines and the two airlines signed a non-disclosure agreement. The shareholders of AMR were more than willing to support the merger as it assured the shareholders some recovery of their investments. Shareholders rarely recover their investments after a company files for bankruptcy Spira, Jan 26, 2013.

With the prospects of the company emerging from bankruptcy and continuing with its normal operations, American Airlines could recoup from its losses and emerge a leader in the U.S. airline industry.

The impact the merger will have on both companies was the main driving force for this merger. Negotiations for the merger were mostly successful because of this fact. American Airlines was able to come out of bankruptcy and maintain its name and headquarters for the new company. The new company had its headquarters located at Fort Worth, Texas, which was formerly the headquarters of American Airlines. U.S. Airways, on the other hand, had the opportunity to increase its destination and fleet, which greatly benefits its customers. The customers now have a broader choice of flights as the airline is now a member of the Oneworld global alliance.

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.

The merger of U.S. Airways and American Airlines mostly had a positive outcome. The merger resulted in the world's largest airline, with over 336 locations, 6,700 daily flights, over 100,000 employees, and $40 billion in operating revenue. This has provided the new company with an avenue to increase its profits in the coming years. The company's stock has seen a rise of over 5.8% since the two companies merged in December 9th 2013 Sharf, Jan 28, 2014.

This indicates the merger will have a positive outcome for both companies in the coming years. American Airline employees will benefit most as they have an option to receive severance packages if they take early retirement. Flight attendants who have worked with American Airlines for over 15 years have the opportunity to take early retirement, and they will receive $40,000 severance payment Maxon, Jan 29, 2014.

This is beneficial to the flight attendants as they can leave the industry early and receive benefits. With the departure of veteran employees, the company will hire young flight attendants.

Before the merger, American Airlines had planned to reduce its wage bill by laying off employees. The merger with U.S. Airways ensured that the workers maintained their jobs. The new company is promoting voluntary retirement, which will benefit the company and employees. Voluntary retirement ensures that the employees who leave are willing and they receive a retirement or exit package.

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American Airlines had reduced the number of flights it operated because there were no pilots available. With the completion of the merger, the airline can now resume normal operations and the pilots have resumed work. American Airlines has managed to emerge from bankruptcy and make new orders for fuel-efficient aircrafts. The new planes will assist in reducing the fuel bill and reduce its operating costs.

The new company will gain from the experience of U.S. Airways, which has been involved in another merger with American West. The experience of the U.S. Airways management will steer the new company to a fruitful future. The CEO of U.S. Airways will head and provide leadership to the new company. This will allow the merged company to improve its operations and ensure a successful merger. Technologically, American Airline had a nice history of technological innovation that would benefit the two companies. The new company will use the technology of American Airlines, and this will allow the U.S. Airways staff to learn and become competent with the new system. The technologies will incorporate reservations, passenger information and bookings. These are the critical areas that will ensure that success of the merger and there is need to ensure the two companies integrate their operations.

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.

This is still a fresh merger, and currently only the top management of the two companies has changed. The U.S. Airways CEO heads the new company and the CEO of American Airlines is the board chairperson for one year after the merger. The changes in the top management will allow the company to formulate a structure that will ensure a successful merger. The new company will encompass the organizational culture of both companies. This will allow the employees to adapt to the different cultures. Initial reports indicate that the organizational culture will be set form the top management. Employees will analyze the CEO, and from their analysis, they will develop a new culture. The organizational structure will combine employees from both companies. The CEO has informed all the department heads to ensure that they select employees from both companies and not just employees from their former company.

The vice president of global sales has released an interim organizational structure for the U.S. based employees Boehmer, Dec 2013.

The structure is not indicative of the final structure it just provides single contact points. This will ensure that there is a single contact point for the customers and clients. Having a single point of contact also provides the employees with a reporting structure even if it is an interim structure. The final organizational structure will be different and will be a combination of the two companies. The organizational structure will reflect the new company and not just individual companies. The new structure will provide employees from both companies with new roles and reporting structures. This ensures that employees embrace the merger and understand the company's new direction.

There have been changes in titles for the new executives, which is an attempt at combining the different departments from the two airlines. The executive team of the new company comprises mostly of U.S. Airways, but it has also incorporated some executives from American Airways. The key and sensitive departments have U.S. Airways personnel in charge with American Airlines personnel working under the departmental heads. This is an indication that U.S. Airways has more experienced executives who have a vision for the success of the merger. The new structure has found a way of ensuring that there is an easy and quick resolution to any sales complaints. This is because both the airlines do not have good sales support. Any customer disputes take long to be resolved, and the new organizational structure should address this to a single contact person or department. For the success of the airline, there is need to have an effective dispute resolution team, and provide customers with proper support especially in regards to sales.

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.

The human resources management for the new company remains the same as the two companies are still operating individually. In the coming.....

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