Merger, Acquisition, and International Strategies

Merger, Acquisition, and International Strategies

Introduction

The two airlines being discussed are United airlines and Go! Airlines. United Airlines is a major US airline operating international and domestic flights. Throughout its history it has witnessed several mergers, acquisitions, and partnerships that helped it to grow to become one of the world's leading airlines. Go! on the other hand, is a small local airline operating in Hawaii. It is a small airline with no plans for any aggressive expansion. However, the airline may decide at a later time to expand its business by merging with another airline or forming a partnership.

United Airline's Strategy for Merger

Since early 2008, Unites airline and Continental Airlines began a series of negotiations in order to merge both the airlines forming one of the largest airlines in the world. Before the merger was finalized, both airlines were one of the largest airlines in the United States. This decision was made under the light of the Delta Airlines and Northwest Airlines merger that led to Delta gaining a significant advantage in the US market. Considering the competitive advantage Delta gained from the merger, United and Continental were sure that the merger would give them a competitive edge over all other US carriers. The size of both airlines coupled with the number of aircraft in their fleet and the number of destinations made it ideal for the airlines to merge in order to share their expertise and strengths (Cracchiolo, 2013).

The initial talks were not conclusive as United also sought another option of merging with US Airways. However, the deal was finalized in 2010 with the airlines deciding to retain United as the brand name and dissolving Continental. There were initial thoughts that the merger would have problems as the services offered by both airlines were slightly different and a consensus had to be reached on the business-level strategy as well as the corporate-level strategy.

Another problem that the merger would face is that they both operate a diverse mix of aircraft with different seating configuration. In the short run, the new airline would manage this diversity. However, in the long run, the fleet would have to be rationalized in order to bring in efficiency and reduce the cost of maintaining them since it is more costly to operate a diverse range of aircraft instead of fewer variants.

Some of the benefits of the merger included the reduction of competition in the market, increase in competitive advantage, the reduction of costs and several other advantages. Since both airlines suffered huge losses during the recession, they believe that the acquisition would result in savings of about &1 billion a year due to fleet rationing and the sharing of resources. The merger was completed in late 2011 and they were finally able to operate under a single name (Cracchiolo, 2013).

The merger was one of the biggest mergers in US history and is expected to yield benefits as costs will be cut resulting the airline offering cheaper tickets which maintaining the same quality of ...