The Merger of American Airlines & U.S. Airways
1.0 Introduction
A few really important days are worth keeping in mind in connection with the birth of the world’s largest airline. These dates are as given under
This was the first phase only. The next step would cover synchronization of each company’s IT system and familiarity with each other’s different processes. However, even the most vocal supporters must have been relieved that day, as impediments were very much present and many a time victory was snatched from the jaws of defeat. (airlinegeeks.com, 4th March2014)
2.0 Issues and Impediments
There were a lot of questions from the section of the public which was against it. Wasn’t American at a valuation of $ 11 billion expensive for a bankrupt company? Why didn’t US airways form mergers with profitmaking companies? Won’t the extra dead weight of American’s liabilities pull US airways too, down into the abyss? What should US airways stakeholders do?
American Air might be bankrupt but its assets are formidable. Where it lacks is the financial power to meet its operating costs, and probably a new strategic plan as the one in hand did not work, as it appears now. Merger between two organizations is done on the basis of the concept that “one plus one is not two but infinity”. No organization is perfect as some lack adequate HR, others R&D, and some others creativity etc. and here’s where mergers play a role. Obviously it makes sense to be merged to someone who is strong where you are weak and vice-versa. There is no dead weight pulling down theory and to the contrary, it is as if two balloons float up, complementing each other. US airways had made their choice of merging partner as they were best qualified to do so. And till now, it appears that the selections were correct.
What about the AAL stock. It is bullish all the way and have been so since the beginning now, so says Susan J Aluise at investorplace.com. Some pros about the American Air Lines stock is
- Investor Satisfaction: American gave a really good deal on replacement of Am stock with AAL stock.
- Abundant cash reserves : After the $11 billion merger, AAL is sitting pretty on $ 9.25 billion reserves which is giving it the cutting edge
- Making innovative changes to boost profits in destinations, tying up with new partners in these new places.
Yet, the two merging partners were constantly in the legal limelight as they were accused of using antitrust measures on which they could piggy back upon. Delta, Continental etc. first spoke up. The crux of everyone’s delivery was that AAL was about to start an oligopoly and the same should be stopped On August, 13, 2013, the Department of Justice, State Attorneys Generals and the District of Columbia filed a lawsuit against the merger of US Airways and American Airlines. The DoJ took back the case exactly 30 days later and tried to reach a settlement, with the partners. The courts consented to the release of American Air from the state of bankruptcy. The Hart-Scott-Rodino act was invoked and FTC approval was sought and obtained.
3.0 Conclusion
Concerned citizens came together and sent a white paper to congress where they reiterated that nothing good would come out of the merger. They said that efficiency cannot increase when the size increases and responses become sluggish. AAL termed this absurd and said they were being convicted without a trial, which statement did have its merits.
References:
Airline Geeks (March 2014).’ New American Timeline’. Accessed on 231/10/14 form the net <URL http://airlinegeeks.com/blog/item/new-american-timeline>
Aluise, S. J. (04/22/2014) ‘The New American Airlines: 3 Pros, 3 Cons for AAL Stock’. Accessed from the internet at <URL http://investorplace.com/2014/04/aal-stock-pros-cons/>
Governor Corbett comments on USDOJ lawsuit over US Airways / American Airlines Merger. (n.d.) >The Free Library. (2014). Retrieved Oct 31 2014 from < URL http://www.thefreelibrary.com/Governor+Corbett+comments+on+USDOJ+lawsuit+over+US+Airways+%2f+American-a0339542275>
