Airline mergers and acquisitions are on the rise across the globe. Theses mergers and acquisitions are highly strategic involving several considerations.
Moreover airline mergers and acquisitions bear serious implications for travelers as well as airline employees. Important issues related to airline mergers and acquisitions are time, approvals, efficiency, competition, passenger benefits and strife.
The airlines industry is abuzz with news of mergers and acquisitions. In the last few years airline mergers and acquisitions have been a growing trend in several countries across the globe. However mergers and acquisitions in the aviation industry are highly strategic in nature and are undertaken after taking into consideration several important factors.
Some of the important factors considered by airlines in taking merger and acquisition decisions are -
- The coverage area of the other airline. Strategically an airline would like to merge with or acquire an airline that operates in routes different from its own. This helps in expanding service coverage and avoiding overlapping of flight schedules.
- The quality of service and brand image of the other airline.
- If the other airline has any partnership with a rival group of airlines.
From the point of view of customers mergers and acquisitions may lead to increased airfares. This is because mergers and acquisitions reduce the number of operators thereby reducing competition and pushing up prices in the aviation industry.
Airline mergers and acquisitions also have important impacts on the employees of the participating airlines.
The major concerns that airline employees are faced with in case of mergers and acquisitions are -
- Layoffs - Mergers and acquisitions in most cases are accompanied by layoffs.
- New job rules.
- Salary concerns - The new acquiring airline or the new group arising out of a merger may not pay the old salaries.
- Pensions and other benefits.
- Seniority - A senior employee of an airline that is acquired may find himself to be not considered senior by the new employer.
Some of the important issues related to airline mergers and acquisitions are -
- Time - Airline mergers and acquisitions take much longer time to materialize than mergers and acquisitions in other industries. This is due to the fact that a lot of considerations are involved from costs to operational issues which are generally large in magnitude and complex in nature.
- Approvals - Approvals are required from governments, often from different levels and different authorities to establish airline mergers and acquisitions.
- Efficiency - Airline mergers and acquisitions can lead to cost efficiency of the operators by the elimination of overlapping routes. For the travelers however, this often leads to lesser frequency of flights.
- Competition - Mergers and acquisitions in the airline industry help to reduce competition significantly. This helps airlines to achieve higher operating margins. On the other hand, passengers may face higher airfares.
- Passenger Benefits -Passengers, who are enlisted for frequent-travel schemes and other similar ones, will have higher mileage pints.
- Strife - Airline mergers and acquisitions are often accompanied by strife related to seniority issues, new work rules, etc.