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CASE STUDY #4AMERICAN AIRLINES – US AIRWAYS MERGERMBAA 517 – MANAGERIAL ACCOUNTING FOR DECISION MAKING
2INTRODUCTIONOn December 9, 2013The American Airlines Group was formed.+=A merger between AMR Corporation, the parent company of American Airlines, and the US Airways Group, the parent company of US Airways. Valued at $11 billion, this is the world’s largest airline group operating more than 6,700 daily flights to more than 300 locations in more than 50 countries worldwide.
3INTRODUCTIONJAN 2012MAR 2012APR 2012 JUL 2012
5INTRODUCTIONThe group aimed to yield in excess of $1.5 billion in terms of added revenue and cost savings each year. Since the merger, the combined fleet of the American Airlines Group consists of 968 aircrafts out of which 627 are owned by American Airlines and 341 are owned by US Airways.
6INTRODUCTIONThe deal states:1.The AMR Corporation stakeholderswill own 72% of the company and the remaining 28% will be owned by the US Airways Group stakeholders.2.The group will carry the nameof American Airlines and hence the group was named as the American Airlines Group.3.US Airways will exit the Star Allianceand will join American Airlines in the Oneworld Alliance.4.The US Airways management team will retain most of the group’s management positions with Doug Parker being the CEO of the group.
7BENEFITS OF THE MERGER1.As US Airways has now joined OneWorld Alliance alongside American Airlines, both the airlines are now allowed to access the other’s network i.e. this leads to a network expansion for both the airlines.2.Global access to a stronger OneWorld Alliance, which is spread across the world, hence providing more options for travel along with domestic and international benefits as the alliance serves nearly 1000 destinations around the world with more than 14000 flights operating in more than 150 countries.
8BENEFITS OF THE MERGER3.The existing US Airways passengers will gain access to American Airlines’ internationaldestinations and in turn American Airlines’ passengers will have better access to smaller U.S cities which the US Airways serves.4.Higher connectivity with 9 hub airports across U.S.A.5.With more than 600 orders for aircrafts, the group will have one of the most efficient and modern fleet of aircrafts in the industry.6.The American Airlines’ AAdvantage and US Airways dividend Miles Program will allow the customers to enjoy the benefit of earning and redeeming miles on either of the airlines and also will provide benefits on flight upgrades, vacation packages, car rentals, hotel stays etc.
9HUB AND SPOKE MODELA Point to Point network is a typical route network where an airline focuses mainly on its Origin and Destination ( O&D ) traffic.
10HUB AND SPOKE MODELThe Hub and Spoke Network is a route network where an airline will not only plan on transporting passengers between two points, but also to connect passengers between two distant cities via its hub.