Resourcing Benefits

Resourcing Benefits - QANTAS AND BRITISH AIRWAYS MERGER 1...

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QANTAS AND BRITISH AIRWAYS MERGER 1. Resourcing Mueller identifies that a standard horizontal merger of Qantas and British Airway’s proportions should typically see the merged firm with increased revenue from increased market power, as well as fallen costs from combined resourcing. 1 The merger will develop resourcing benefits through the development of (a) Financial Synergies, and (b) Operational Synergies. The creation of such synergies will by definition, create economic value that is greater than the sum of its parts. 1.a Financial Synergies Analysts Neil Glynn has identified the critical requirement of firms to be able to ensure economic stability and weather the current economic crisis 2 . In the last year, British Airways has reported a 91.6% half year drop in profit 3 , whilst Qantas has announced that planned capacity growth in 2009 is at zero percent 4 . In the current economic climate of uncertain operating conditions, record fuel prices, and weak economic conditions, IBISWorld Industry Reports identifies efficient internal processes and economies of scale as key to the airline industry’s success 5 . By nature, the level of capital intensity in the airline industry is high due to operational costs, aircraft purchases, passenger service and staffing wages 6 . However, with significant sale economies, Mueller asserts that a horizontal merger can reduce the average cost of the merging firms by increasing their scale of operation 7 . A successful
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This note was uploaded on 08/11/2009 for the course ECOF 3001 taught by Professor - during the Three '09 term at University of Sydney.

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Resourcing Benefits - QANTAS AND BRITISH AIRWAYS MERGER 1...

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