Questions & Answers
QUESTIONS AND ANSWERS
1. Evaluate the internal and external environment and analyze major obstacles to making this merger successful.
To answer satisfactorily this question, students must prepare, at a minimum, the weaknesses (internal) and threats (external) parts of a SWOT analysis. Students, based on their educational and professional background, may create many obstacles, but the major strategic issues are outlined below:
Internal Obstacles
a) Culture--Started in 1983, America West Airlines (AWA) is a much newer airline and is the only post-deregulation startup to survive. It is known as a lower fare, full-service airline that has achieved profitability as recently as 1Q and 2Q of FY05.
In contrast, US Airways (USA) is larger and a legacy carrier and has been in existence since 1939. It has not been profitable, on a fiscal year basis, since 1999. The company has been in bankruptcy twice since 2002.
In evaluating each company's history and its current standing within the industry, a clash of employee cultures must be considered. The merged airline will be headed by existing AWA senior management. However, a smaller, younger, more fluid, and profitable carrier merging with a larger, unprofitable, legacy carrier has the potential for two organizational problems. First, the merged company has elected to utilize the US Airways name, a perceived stronger brand image than AWA, and this decision could cause disgruntlement with the employees of AWA, stakeholders in the more profitable company. Second, because AWA is a younger company, some employees may have lower seniority than their USA counterparts.
b) Seniority--USA has managed to obtain major wage concessions from its employees during its two Chapter 11 bankruptcies, and its wage rates are generally comparable to that of AWA. While wage issues seem to be a minor area of concern, the issue of seniority looms large. AWA employees, who helped to build a profitable airline and therefore
1. Evaluate the internal and external environment and analyze major obstacles to making this merger successful.
To answer satisfactorily this question, students must prepare, at a minimum, the weaknesses (internal) and threats (external) parts of a SWOT analysis. Students, based on their educational and professional background, may create many obstacles, but the major strategic issues are outlined below:
Internal Obstacles
a) Culture--Started in 1983, America West Airlines (AWA) is a much newer airline and is the only post-deregulation startup to survive. It is known as a lower fare, full-service airline that has achieved profitability as recently as 1Q and 2Q of FY05.
In contrast, US Airways (USA) is larger and a legacy carrier and has been in existence since 1939. It has not been profitable, on a fiscal year basis, since 1999. The company has been in bankruptcy twice since 2002.
In evaluating each company's history and its current standing within the industry, a clash of employee cultures must be considered. The merged airline will be headed by existing AWA senior management. However, a smaller, younger, more fluid, and profitable carrier merging with a larger, unprofitable, legacy carrier has the potential for two organizational problems. First, the merged company has elected to utilize the US Airways name, a perceived stronger brand image than AWA, and this decision could cause disgruntlement with the employees of AWA, stakeholders in the more profitable company. Second, because AWA is a younger company, some employees may have lower seniority than their USA counterparts.
b) Seniority--USA has managed to obtain major wage concessions from its employees during its two Chapter 11 bankruptcies, and its wage rates are generally comparable to that of AWA. While wage issues seem to be a minor area of concern, the issue of seniority looms large. AWA employees, who helped to build a profitable airline and therefore