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United airlines completed its merger with continental airlines in October 2010 rendering it the largest airline in the continent Moreno, (2010). The two airlines are to operate separately until they obtain a single operating certificate, which is issued by the federal aviation administration. The airline combined will operate under the name-united airlines. As they wait for finalization of their deals, they shall not add on new routes until there is a gain in strength by the economy. Merging may sometimes lead to bankruptcy; there have been cases of bankruptcies and reorganizations leading to stopping of flying of the same. Continental has undergone a bankruptcy organization a few years back and managed to come out strong enough to get a warrant on merging as pointed out by congressional digest (2001).
Merging is the act of joining two or more to form one. Merging facilitates for
Strengthening of the parties involved. That is to say, when companies come together they are able to form one unit, which is stronger. The element of being stronger helps them to effectively compete with their competitors and not face the risk of being outdone, which would lead to poor returns. If they get less return, they may be forced to run on debt which most of the time will lead to bankruptcy or even forced into total shut down of the company as it may only realize losses. It might somehow survive but o very strained means and this could also lead to forcing the management to lay off some employees hence rendering them jobless. Airlines have been reported to seek merging with other airlines to improve on their profits as well as financial sustainability Lori (2010). However, it is important to weight this against challenges and cost of operations involved according to GAO reports, (2010). As well as merging helps in cutting down on costs such as expenses. Resources are shared equally leading to reduced costs, otherwise a company if running on its own is forced to buy its own resources rendering such an activity very expensive and sometimes even not necessary. For instance when a company merges they are able to utilize one website, have common adverts hence, reduced advertising cost, a common employee database but sometimes that is not the case according to Moreno (2010), dis-unity of employees to form a common union, does not help save any costs as expected by the mergers. Operating businesses has proved difficult and challenging over the years due cost factors but with ideas such as merging, this has been no longer a major problem. Merging helps boost potential as the local firms are highly promoted and therefore no chances of having potential wasted.
Merging further facilitates for companies to be able to acquire new market shares, maintain their market share. However, this has its own disadvantage. Getting a bigger share might mean no market share or market share enough to sustain the local firms. Another factor is cutting down on competition, this is so in that if they were running as separate entities they would be competing against each other but if they merge and become one they can only compete against other competitors but not amongst themselves. According to Reed (2010), a merge between American and us airways theoretically seems as the best way to compete with other giant competitors.
Jayetta (2008), merging facilitates for growth as the merged company’s are able to minimize cost hence increase in revenue leading to rise in profitability ratios. This is in turn used for the growth of the company. Merging is a very efficient way of helping firms adapt to changes and working towards overcoming challenges and they emerge victorious. Merging leads to monopoly or market dominance at times hence, a company is able to enjoy the benefits of monopoly. For instance, they get to dictate fare rates, they can easily do away with activities that drain their resources such as provision of food in the planes. However, if one is not careful monopoly might lead to factors such as compromising customers’ value James (2009). Companies should therefore, seek to have market colony other than monopolization. Merging gives an added advantage to the hosting countries, as the prices of products are low and the product and services are locally and readily available. There is also job creation hence curbing the problem of unemployment.
The united continental merge is set to harmonize their coach products by having back seats increased and seats from the continental planes removed to give them uniformity. Generated revenue by elite frequent fliers who are mostly the occupants of those seats plus revenue from fliers paying for the privilege outweighs theoretical revenue loss from having fewer seats on the given planes besides the passengers are much more satisfied with the experience they get during their travel as people appreciate more space. Extending economy plus, which is five inches legroom, having several rows of seat in the coach cabin on the front side. More than 850 planes will have the product by the end of year 2012.
United and continental are working towards uniformity of their products, brands, frequent flier plans and a harmonized website. Having a separate or un-harmonized products and services as well as un- harmonized management, it will lead to a very complex structure bound to have a lot of miss understanding as asserted by the Canadian travel press (2010). This is very dangerous as it leads to poor production as well as enemity, which should have not been there in the first place. It may also give a bad image of the company and may lead to losing trust of their hard gained clients or customers. It will also lead to lack of confidence with the investors Unnikrishnan (2010). After finalizing the merger between united airlines and continental airlines, they started trading their stock but this may fail to fulfill its purpose if there is no unity. Finally, if there is no hope of saving the situations, it may lead to splitting and it might prove very hard to pick up from the already broken pieces. They shall eventually work on the maintenance, fleets, training the staff involved and the operations standardization. An interim advertising campaign was set to kick off by the united airlines and continental lines. Their website is to be given a new look, melding the united name with continental well-known globe. The new advertisement campaign will make good use of billboards as well as magazines in the carrier’s hemisphere. Later it is to venture in the use of newspapers and magazines, which are to be supplied in the hub markets that serve the two airlines with strong emphasis placed on New York area, which has proved to be a very competitive market. A new signage will be launched by the united carrier at stadiums where they sponsor major baseball league teams and later the signage will appear on big airports. The particular new logo and look would appear having a clear connection with the groups sponsored by the carrier, and that includes professional golfers association and the Oscar academy awards as stated by Reed, (2010).
31 mainline jetliners along with 155 regional aircrafts flying on behalf of the company and 118 continental mainline planes have been renamed. The new united is the world’s largest airline by traffic and is based in Chicago. The new advertisements will not have a tagline but will highlight on the airlines superior route network, guaranteed low fares , variety of product attributes and definitely a new look. Getting rid of the economy plus, could prove to be very unpopular as well as a big blow to travelers who have the ability to buy access to planes with bigger room seats. In 1999 united begun a program to differentiate itself from its potential competitors. In 2000, the American started a similar program though in 2005 they dismissed the program claiming that adding back seats and reducing the legroom had an increase of $100 million as revenue per year.
500 jobs will be eliminated by the merging of the continental and the united airlines especially considering the fact that it shall be moving its headquarters from Texas City to Chicago.500 hundred is roughly estimated to be 17% of 3000 estimate, part of the management and employees in the administration in Houston. It was agreed before the merger of the two companies to have the relocation of the headquarters to Chicago. A careful process was being worked on to help establish a standard organizational structure and department location. Access to outplacement services, subsidized health benefits, severance and travel pass privileges will be granted to those who lose their jobs.