UNITED AIRLINES AND US AIRWAYS MERGER

United Airlines And US Airways Merger

United Airlines And US Airways Merger

Bacground

Since the announcement of the merger between US Airways and United Airlines in September 2005, several systems issues have become apparent. The management team agrees that the largest issue currently facing the new US Airways is the ineffectiveness of the new vacation booking system available to online customers. Despite over 6 months of transition time, US Airways and United Airlines continued to hold onto separate websites. Having separate websites wreaked havoc in the online booking world. It has been observed that the separate website addresses has aided to the customer confusion, both customer and employee frustration, and ultimately causing a significant decline in overall sales (Freiberg 2006). Annual data collected from US Airways/United Airlines shows a steady decline equaling 33% from 1st quarter 2005 to 1st quarter 2006.

The study of several other successful mergers provided some possible answers to the US Airways/United Airlines apparent struggle. Sprint and Nextel, JP Morgan Chase Bank and Bank One as well as the Wrigley Company and Kraft Foods supplied numerous options to consider. Successful corporation mergers are not only contingent upon the increase in sales, but also customer service and employee satisfaction/retention. The marketing strategies will also play a vital role in the overall merger success.

Sprint and Nextel are both very well known names in the wireless communication business. During the merger, both companies agreed to the importance of a strong marketing department as well as the streamlined website and network access. The successful purchase of Bank One by J.P. Morgan Chase is largely due to the gradual change over.

Advantages and Disadvantages

Chicago-based United is pondering a merger with US Airways, the third time the companies have attempted to combine their businesses in the past decade and the kickoff to what could be a frenzied round of dealmaking among U.S. carriers (Austin and Pinkleton 2000). Negotiations are progressing but there are no guarantees a deal will be completed, said a person with direct knowledge of the discussions. The merger talks were first reported by the New York Times.

But analysts and airline industry observers believe that United's intent may be to draw Continental Airlines to the bargaining table. The two carriers, already joint venture partners, would form the world's largest carrier with a global network reaching from South America to Asia and Europe, making it a potent competitor to current No. 1 Delta Air Lines.

"This looks like an attempt to get something going," said former Continental CEO Gordon Bethune, who has no direct knowledge of United's plans. Representatives of Continental, United and US Airways declined comment. A Continental and United merger would create about $5.8 billion in market value and would generate cost-savings and new revenues of about $2 billion, estimated Vaughn Cordle, a retired United pilot who is managing director of AirlineForecasts LLC, a Virginia-based market research firm.

Combining United and far-smaller US Airways would generate about 65 percent of that increased market value: about ...