American Airlines – US Airways Merger
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Case Code: BSTR493 Case Length: 16 Pages Period: 1929-2016 Pub Date: 2016 Teaching Note: Available |
Price: Rs.500 Organization: American, US Airways Industry: Airline Countries: US Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
On October 23, 2015, Fort Worth (US) based American Airlines Group (American Airlines) reported a net profit of US$ 1.9 billion, the highest quarterly profit for the airline since its formation in 2013. The airline was a result of the merger between the erstwhile American Airlines (American) owned by the AMR Corporation(AMR) and US Airways owned by US Airways Group. The merged airline retained the name American Airlines.
Approved in 2013, the merger of American and US Airways took more than two years to complete. The merged entity emerged as the largest airline in the world, operating nearly 6,700 daily flights to more than 50 countries. AMR shareholders owned 72% and US Airways Group shareholders owned 28% of the merged company's common stock.
Before the merger materialized, analysts viewed it with skepticism. They opined that the merger may not turn out to be successful as the new airline was likely to face huge challenges during integration. Many hurdles existed in the form of integration of the complex reservation system, combination if the frequent flyer programs, consolidation of seniority list for the pilots, and amalgamation of the different corporate cultures of the two entities. But to avoid any such hindrances, American Airlines devised a three-month drain down approach for smooth transition rather than a more abrupt overnight changeover. Expressing confidence over the transition plan, Erin Frey (US Airways’ manager in charge of the transition), stated, "So many moving parts that people will never notice. It’s like when you’re going to see a play. So much is going on behind the curtains. But when you pull up the curtains, customers just get to see the product."
Although it looked like American Airlines had done everything technically necessary for a smooth transition, it remained to be seen how well it would perform in the future.
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