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Airline Industry case study.docx

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Carleton University
BUSI 4708
David Peippo

BUSI 4708 Connecting Within One World Name: Lupita Ardhyaningrum Student number: 100807173 1. Mergers and Acquisition Advantages: a) Increases global corporate competitiveness and help reduce/cut competition in the airline industry. b) Increases sales revenue and higher operating margins: the expansion allows them to increase their sales revenue from offering more flying routes to selected destinations worldwide. c) Larger market share, penetrate target market and growth opportunities. d) Improves operational efficiency. e) Gaining cost efficiency through the implementation of economies of scale, lowering cost operations. f) Increases shareholders net worth. g) More solidity in a more collaborative contract, so it’s more difficult to break compared to non- equity alliance. h) More control over foreign operation (after acquisition). I) Merge of the two airlines can lead to better positioning in the global market place. J) Can enhance their members’ reputations and if successful can complement each other Disadvantages: a) Some governmental regulations, such as ownership requirements would prevent merger/acquisition. b) If permissible, approvals are required from each country’s government. c) Daunting problems arise from major changes in corporate culture, management styles, business direction, and key operating procedures. d) High risk of failure: failure to consider and incorporate the new company and differences culture (country cultures and corporate cultures) Non-equity alliances Advantages: a) To spread and reduce costs. b) Maintain ownership positions. c) Allows each company to keep its own identity and operate independently: except for the coordination of transoceanic routes. d) Despite sharing flights, airlines can preserve its own culture and brand appeal to its own nationality. e) Can reduce operational cost: integrated check-in counters for all Oneworld passengers and combining airport lounges Disadvantages: a) Unlike merger and acquisition, non-equity alliance is easier to break. b) Sharing revenue. c) Divergent objectives. d) Might be hard to be cooperative while trying to compete directly on some routes 2. Some airlines, such as Southwest in the long run won’t be able to survive without extensive international connections to serve passengers need. Other airlines have been partnering up with other airlines in order to extend their destination routes and increase frequency of their flights by coordinating schedules. Partnerships will boost sales, which can lead to offering of new routes. Cooperating with various other airlines will also attract more customers because of points/airmile programs they earn from flying. Thus, airlines have worked together to provide better/seamless experiences for passengers and to cut costs. Without partnering up and collaborative agreements with other airlines, Southwest for example will face daunting problems in the long run, eventually, because of rising regulatory, cost and competitive factors they will have to face alone: maintenance cost, oil prices, reservation systems, airport fees, etc. 3. Because local government regulates airlines and rule out restrictions and r
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