Mergers, Acquisitions and Takeovers Case Study

US Airways - America West Merger: Flight to Success?

OR

Abstract:

On May 19, 2005, US Airways Group announced that it would be acquired by Phoenix-based America West Holdings Corporation, parent company of America West Airlines. The combined airline named US Airways positioned itself as the ‘World’s Largest Low-Fare Airline’. The newly formed US Airways Group finalised all transactions enabling America West and US Airways to begin operations as one carrier - US Airways in September 2005. Both the airlines merged to create the fifth largest domestic airline in the US, which was positioned as the largest full-service, Low Cost Carrier in the country. William Douglas Parker, CEO of America West, became the chairman, president and CEO of the merged airline.

Parker in his early forties was the youngest CEO of a large US airline. He was the person behind the revival of America West after the 9/11 terrorist attacks. In 2005, it was his responsibility to make the merged airline a success. Prior to the merger, US Airways was the dominant carrier on America’s East coast with hubs in Philadelphia, Pittsburg and Charlotte, North Carolina. But the airline was suffering from financial problems and had sought bankruptcy protection for a second time in 2004, since the 2001 crisis. America West was concentrated in the Western region and was a full-service carrier offering services at discount prices. In early 2005, prior to the merger, the airline was nearing bankruptcy.

Criticism over the merger started when the code name for the merger talks leaked out in April, 2005. The merger named Project Barbell (for the airlines’ strengths on the opposite coasts of the country), quickly earned the nickname Project Dumbbell. Critics questioned the wisdom of America West’s decision to link up with a bankrupt partner. In Parker’s opinion there were distinct advantages in merging with an airline under bankruptcy. Labour issues dominated the post merger scenario. Parker had anticipated these problems, as it was true for any merger, especially between culturally diverse organisations.

Pedagogical Objectives:

• To study Industry Life Cycle Model
• To discuss about consolidation as a way out of the negative financial trend.

Keywords : Mergers,Acquisitions,Alliances Case Study;US Airways; America West; Merger; US Airline Industry; 2001 attacks; Legacy carriers; low cost carriers; low cost business model; price wars; oligopolistic market; airlines deregulation; Project Barbell; William Douglas Parker; Corporate Culture; Labour Integration

Contents : 
Ground Realities
US Airways: The Low Cost, Full-service Carrier
Challenges faced by US Airways
Project Barbell or Project Dumbbell?
The US Airlines: Market Share
The Low Cost Business Model
The US Airline Industry
The US Airline Industry: Market Share
The US Airline Industry: Cost Structure