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Assignment 2 Mergers and Acquisitions The American Airways and US Airways Merger




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The American Airways and US Airways Merger
Assignment 2 Mergers and Acquisitions
Use the Internet to research a publicly traded company in the United States that has undergone a
merger or acquisition within the last three (3) years. Take note of the circumstances surrounding the
merger or acquisition.
Write a four to six (4-6) page paper in which you:
1. Examine the circumstances that resulted in the merger or acquisition for the selected company.
Speculate on two (2) reasons why the resulting decision to merge or to acquire / be acquired was made.
2. Assess the significant positive (or negative) effects of the merger or acquisition. Provide at least two
(2) examples of those effects now that the merger or acquisition has been completed.
3. Examine the organizational structure that has resulted from the merger or acquisition. Analyze the
major differences between the resulting company and the original two (2) organizations.
4. Determine whether or not the human resources management practices of the company were modified
to reflect the outcome of the merger or acquisition. If no changes were necessary, speculate on the
reasons why they were not. Provide a rationale for your response.
5. Use at least four (4) academic quality resources in this assignment. Note: Wikipedia does not qualify
as an academic resource.
The most recent in the line of mergers of American publicly traded companies is that
of the American Airways and the US Airways. The new company formed by their
merger is known as American Airlines. By their official merger the American and US
airways have created the world’s biggest Airline which has a global network of 6700
daily to more than 330 destinations and across more than 50 countries. The new
company also has more than 10,000 employees worldwide. (BBC, 2013)
American Airways had gone into bankruptcy in 2011 and was the seventh one to have
gone bust since 2000. This merger between American and US Airways has brought
the company back out of bankruptcy. Moreover, both the companies also seek to cut
their costs and the merger has proved vital in this regard. Owing to the financial woes
the airlines companies in US have been facing, there have been a series of mergers
which has nearly reshaped the American Airlines industry.

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The mergers have reduced the number of major airlines in America from nine to just
four. The previous mergers in the US airlines industry have faced several difficulties
and have also taken years to implement. This merger was also mainly fueled to
withstand the increasing financial pressures over airlines companies. American
Airways is out of its bankruptcy and the two companies have also formed a really
formidable partnership which makes the new company the goliath of the American
Airlines industry.
Together they have formed the world’s biggest airlines company and also intend to be
the most profitable. The CEO of US airways Mr. Doug parker had pushed quite hard
for the merger. UAL, Delta Air Lines and Southwest Airlines all have merged
previously with other companies and they control nearly 80% of the whole US
domestic airlines industry. American Airlines formed after the merger with the
combined strength of the two airlines companies will be better able to compete in the
market. While this merger was intended to bring American Airlines out of bankruptcy,
it was also intended to form a formidable union to beat the ever growing competition
in the US airlines industry. (BBC, 2013)
The merger has also benefited both the companies highly, especially the American
Airlines which was able to come out of bankruptcy due to the merger. The newly
formed American Airlines group is now the world’s largest Airline by traffic. The
shares of the company after merger rose 2.7% to $24.60 in their first day of trading on
the Nasdaq stock market. The benefits of the merger for American Airways especially
since it had gone bankrupt in 2011 were quite unexpected.
AMR’s creditors will be repaid with interest and its big unions and common holders
will be given a big slab of equity in the new company which is quite rare an outcome

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for a bankruptcy. What generally happens in case of airlines restructuring is that the
creditors receive cents on the dollars of their claims and the common holders get
wiped out. Holders of AMR common shares, received around one share in the new
company for every 15 shares held in AMR, which is close to 3.5% of the new
company. The AMR holders are also in line to hold a third of the new company or
around $ 5 billion of equity.
The new formed company also has 600 aircrafts on firm order which will provide a
really big boost to its fortunes. Many previous mergers in the US airlines industry
have not been very smooth and it is really a formidable task to make a merger work.
However, there are indications that the merger will be fruitful and both the companies
which have combined together will earn significant benefits along with their
employees. Still, the biggest benefit is that it has not just brought the American
Airways out of bankruptcy but will reverse its fortunes in the coming days. Previously
the US Department of justice had blocked the merger due to serious concerns arising
regarding price and competition in the airlines sector and objections being raised by
consumer groups. (Rushe, 2013)
Generally, restructuring brings quite big challenges for companies and it is why
implementation of mergers sometimes takes very long time. Apart from combining
the two companies’ assets the companies are faced with several challenges in terms of
their culture and governance also. Mergers have failed previously because of the
difficulties in implementing these changes. However, it appears that AMR and US
Airways are ready to face this challenge and to align the two companies to make the
best of this merger.

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Really great stuff, couldn't ask for more.