Assignment 2: Mergers and Acquisitions
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.
The two major contributing factors influencing the merger of American Airlines and US Airways were the push by American Airlines’ investors and the urgent, time sensitive demands of US Airways CEO Doug Parker. In an article titled "US Airways CEO Doug Parker says his airline won't wait forever for American Airlines merger" Doug Parker described the fiscal environment that led him to urge American Airlines to become acquired (Freed, 2012). The fiscal situation urged American Airlines to make a major decision that led to the merger. The bankruptcy protection shielding American Airlines was ticking towards its end. US Airways CEO Doug Parker urgently wanted to acquire the troubled airline before the protection provided by the company’s bankruptcy protection ended. US Airways CEO Doug Parker stated in an interview that “he may not still be interested after American comes out of bankruptcy protection” (Freed, 2012). Bankruptcy protection provides a company with the flexibility to alter contracts and sell the extra planes. American Airline’s investors also pushed for the merger. The two companies also complemented each other in the destinations they served. With a combined total of 900 destinations being served by the two companies only 12 routes overlapped (Fried, 2013).
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.
Both customers and the company's profits benefit from the merger of American Airlines and US Airways in 2013. The airlines customers gained a more efficient service as a result of the merger. The massive company has stabilized their profit margin and can afford to provide customers with a higher level of customer service and an overall better flying experience (Bachman, 2013, p. 126). The company has steadily gained profitability since the merger. In the first quarter following the merger, US Airways reported profits of $480 million; in comparison to the year prior the company had lost $297 million in the first quarter. The first quarter is the weakest period for the airline industry. The three months immediately after the merger of American Airlines and US Airways led to record breaking profits for US Airways (Koenig, 2014). The merger produced happier customers and a more profitable company.
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.
At first executives and employees of American Airlines opposed the merger; before the actual merger happened US Airlines CEO Doug Parker persuaded the American Airlines employees that the merger was in everyone’s best interest (Freed, 2012). US Airlines CEO Doug Parker is a charismatic leader and a polar opposite to American Airlines CEO Tim Horton. With multiple unions and a bucket list of government regulatory bodies overseeing the company organizational structure can never be flat. However, US Airlines CEO Doug Parker has an ability to communicate with all levels of employees giving the company a more modern feel. The merger was completed as an all-stock deal. All of American Airlines creditors were paid as the company was merged into US Airways. The two company’s stocks merged shaping an image of financial stability. Labor unions were informed early giving stakeholders confidence in the security in light of the upcoming changes. US Airways began negotiations with American Airlines’ unions before the merger took place. The proactive measures taken by US Airlines minimized the drama of organizational changes during the merger (Thomas, 2014). Day to day operations did not change overnight with the merger. Changing the colors on the tails of the airplanes, the uniforms worn by the employees, and the signage over the loading gates will take 18 to 24 months to change. The companies’ credit card affiliates began their negotiations for the contract after the merger. The merger is the loyalty programs will take time to merge (Maynard, 2013). The changes to the organizational structure of the company will stretch into 2015. In order to combine American Airlines and US Airways merged into the largest American airline there are many details that need time smoothen out to ensure that customers receive continuously smooth service. 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 changes to the human resources management practices during the merger were unique to the situation. US Airlines CEO Doug Parker did something never seen before as he proposed the merger of the two companies. He had secretly negotiated with American Airlines’ three unions before approaching the American Airlines CEO Tim Horton. During tough times, Parker was able to offer the worker better pay. The employees in turn led in the persuasion for the merger. Many changes to the human resources structure, policies and practices happened after the merger. Employees received an increase in pay. The pilots, flight crews, and ground crews’ cheered, stock prices rose, and the company is now the largest airline in the United States (Tully, 2013, p. 169). As a result of the proactive actions of US Airlines CEO Doug Parker, there was no union opposition to the merger. The employees wanted the higher pay and financial stability offered by the merger. There was a great deal of restructuring of the human resources hierarchy of the companies but very little surprise. Parker’s proactive actions led to a happier more efficient workforce.
The merger of American Airlines and US Airways was a gainful move for both companies, stakeholders, employees and customers. The company’s profits are soaring higher than any airline has even reported before. The employees are receiving higher levels of pay. Customers are benefiting, with higher levels of customer service. Though the merger is still recent and the superficial changes are coming soon the company has already gained a great deal from the merger of 2013.
References
American Airlines Group Inc. (previously known as AMR Corporation) SWOT Analysis. (2014). AMR Corporation SWOT Analysis, 1-9.
Bachman, J. (2013). Do customers benefit from an American-US Airways merger?. Bloomberg Businessweek, (4355), 126.
Freed, J. (07/18/2012). US Airways CEO Doug Parker says his airline won't wait forever for American Airlines merger. Canadian Press, The,
Fried, B. (2013). Positive outlook is key in sorting out American/US Airways merger. Air Cargo World, 103(3), 46.
Koenig, D. (Apr 24, 2014). After merger, American Airlines and US Airways post first-quarter profit of $480 million. Canadian Press, The,
Marks, M. L., & Vansteenkiste, R. (2008). Preparing for organizational death: Proactive HR engagement in an organizational transition. Human Resource Management, 47(4), 809-827.
Maynard, M., (2013). What To Expect Next From The American-US Airways Merger Forbes,.
Thomas, Z. (2014). American Airlines restructure. International Financial Law Review, 33(6), 227.
Tully, S. (2013). Inside The World's Biggest Airline Merger. Fortune, 167(4), 169.
US, A. (8). US Airways Named One of the 50 Best Companies for Latinas to Work for in the U.S. Business Wire (English).
