Airline Industry Mergers

By: EconomyWatch   Date: 30 June 2010

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Airline industry mergers are carried out to bring about changes in response to the dynamic economic conditions of the aviation industry and determine corporate aims of competitive ratios. Not all, but some airline industry mergers may go wrong, leading to limited options to select from, hike in prices, poor quality pf services offered etc. However, such instances are rare.

Instances of airline industry mergers like Air France taking over KLM, the Dutch airline, have enhanced the number of flights and offers various flight options to select from. Airline industry mergers have ample scope for future development and growth. Airline industry mergers are also done to attain growth and effect higher profitability. With regard to airline industry mergers, costs are an important factor. Airline industry mergers involve leasing of airplanes and purchasing airplanes.

 

Airline industry merger of World Airways Inc and Global Aero Logistics Inc:

One of the instances of airline industry mergers was when World Airways Inc. together with North American Airlines, under the banner of the parent company called World Air Holdings Inc., was taken over by Global Aero Logistics Inc. The ATA operates under the banner of the parent company called Global Aero Logistics Inc. This merger involved a transaction cost of USD 315million. After the merger, USD 12.50 was the price which was determined for each share of the company. As a result of this merger, various airways services were implemented. These services included chartered and schedule flights. The number of airplanes was 56 and the merger provided employment to as many as 4,500 people. Revenues collected post-merger were estimated at USD 1.6 billion.

Factors which influence mergers:

There are many characteristics which effect mergers. The prominent ones are enumerate below:

  • Globalizing competition
  • Financial circumstances prevailing in the market
  • Decreasing the strength of the industry.
  • Bringing about integration in the industry
  • Effecting changes in the technology used
  • De-regulation

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