AVIATION MANAGEMENT

Fleet Planning Coursework A - Aviation Management

Fleet Planning Coursework A - Aviation Management

American Airlines - US Airways Merger

The merger talks between America's largest commercial airline, American Airlines, and another major competitor, US airways has been underway for the past few months. After other major airlines in the industry have merger with their competitors in order to improve their position in the market, US Airways has also decided to hold talks with AA in order to merge (The associated press). Since AA has filed for protection under chapter 11 of the US bankruptcy code, US Airways has decided to take this opportunity to try to merge with the airline in order to form a new airline that would be beneficial to both. It has also set a timeframe for the merger, According to US Airways; the merger should only take place during the period when American Airlines is under protection from bankruptcy.

Prospects of Traffic Growth

Since the two airlines will no longer be competing with each other, they can rationalize their routes by using larger aircraft with fewer frequencies. This will lead to spare capacity since they will be able to better manage the routes and thus achieve a higher seat occupancy factor. The spare capacity could be used to open up new routes which the two presently do not serve. This would increase the number of passengers considerable in two ways. Firstly, new routes will take away passengers from competitors and secondly, due to the massive route network after the merger, better connecting flights will be available thus attracting more passengers. The routes of the two airlines differ to an extent specially the international routes. This will give the new airline an edge over its competitors since the strengths of both the airlines will be amalgamated to form a strong network (Mann, n.a.).

Post-Merger Growth Prospects

The growth prospects after the merger are quite bright due to several reasons. Firstly, the merger will reduce the competition in the market, thus the airline will be able to offer its services at slightly higher fares without affecting the number of passengers. Reduced competition will also allow the airline to operate fewer flights on networks where both used to operation without affecting the number of passengers. This rationalizing of routes will lead to cost savings because of fewer flights, reduced workforce, and the usage of larger aircraft (Mann, n.a.). The spare aircraft can subsequently be used to begin flights to new destinations in order to increase the growth rate.

Apart from these factors, US Airways has a good presence in Latin America and Asia while American Airlines has a strong domestic presence (Yates, n.a.). This will result in an increase in passenger traffic due to the ease of getting a connecting flight to almost every destination in the United States. The new airline will be part of One World alliance; therefore it will be able to take advantage of the code share and interlining agreements to expand well in the domestic as well in the international ...