AIRLINES GLOBAL ALLIANCE

Airlines Global Alliance

Airlines Global Alliance

Introduction

The purchase of one company by another (acquisition) or the union of two companies, leading to another larger (merger) is one of the most frequent ways to win today and competitiveness dimension. Generally, this type of business operations is caused by the identification of a threat or an opportunity in the market (Wooldridge 2002, p. 104).

The airlines have an economic impact far wider than one might think. They have a direct and decisive income from other businesses in different sectors, companies such as aircraft manufacturers in the image of Boeing and EADS, engine manufacturers such as Rolls Royce and Safran and many fuel suppliers are impacted by the activities of air carriers. The development of air traffic should not be taken lightly.

Many countries had their traditional airline "national" airline owned and managed by national governments, which also regulates the use of the airspace of the country by private companies (Valentino & Brunelle 2004, p. 393). However, in 1979, deregulation has begun to emerge in the United States with the "Open Skies" bilateral agreements that allowed the liberalization of aviation markets and minimize government intervention. They have helped to increase competition, lower costs and thus allow the development of air traffic. Air traffic was so popularized and saw passenger numbers grow steadily until the 2000s. Passenger transport, then declined in the early 2000s mainly because of fear of terrorist attacks (following the attacks of September 11, 2001 in New York), and today because of the financial crisis.

However, in this paper, we will analyze the strengths and weaknesses for airlines adopting a global alliance or merger & acquisition strategy including cross-border merger and acquisition.

Discussion

The first agreement that could be implemented would involve Delta Air Lines Inc., the third U.S. airline by passenger traffic, and Northwest Airlines Corp., the fifth, say sources close. UAL Corp., parent of United Airlines and Continental Airlines Inc., the second and fourth U.S. carrier, respectively, hold exploratory talks, says a source close. The negotiations, however, may fail. In any of the scenarios described, potential partners have less than 5% of total seats in competition with each other, according to OAG data from Back Aviation Solutions (Ulrich 1996, p. 176). "It is interesting to note that most U.S. carriers do not compete with them," said John Weber, managing director at Gartner. The wave of mergers result in changes in service as the combined companies begins to reduce redundant routes, streamline their centers connection and eliminate jobs.

However, any combined company would have difficulty mastering airfares. A union between Delta and Northwest would control 22% of the U.S. market in terms of passenger traffic before making cuts in service redundant. The combination of United and Continental dominate 24% of the market before reductions. However, low-cost airlines control 30% of domestic capacity which helps to keep prices low (Storey 2007, p. 345). Some of these operators are beginning to offer international travel whiles it non-US airlines are expanding their service in the U.S. Also, the entry into force in April a treaty between ...