Statistics Power Point Presentation

Business Decision Making Part One

QNT275

US Airways and American Airlines merger

The US Airways and the American Airlines merged in 2013 to form the American Airlines Group which serves 336 destinations across the world. This merger presents an opportunity to the airline group due to increased outreach globally. The newly created airline's group serves both business and pleasure travels with the corporate customers are expected to be the biggest customer group. The airline's group expected to have an increase in its revenue as it expands its customer base both locally and internationally. The merger presents a strengthened position of the airline group in the market and an upper hand in competing against airlines (Reed & Reed, 2014). 

Will the merger create an opportunity to generate increased financial and operational synergies? The cost-saving aspect that the merger presents by reducing flights that fly the same routes and also reduce flights on the international destinations that were served by both airlines previously. The merger uses low cost, fuel efficient aircraft and increased sitting capacity of more than 50 per aircraft subsequently reducing operational cost (Reed & Reed, 2014). Previous mergers in the industry have witnessed increased cost synergies and the similar result was expected in the merger between the two airlines. Some of the airlines that have benefited from mergers include the Delta Airlines with the Northwest Airlines merger in 2008 that experienced higher cost synergies of more than $1 billion.

The merger brings cost-saving practices by increasing the use of fuel efficient aircraft which is expected to be a long-term achievement for the American airline group. The airline plans to replace the 56-seat aircraft with 76-seat aircraft which are more fuel efficient. This move reduces expenses that individual companies would have spent in repairing the old aircraft. Aircraft with larger capacities are economical as flight numbers are reduced between destinations.

Operational and the financial costs are the variables in the decision to create a merger between the two airline companies. Operational costs is a dependent variable and are influenced by the financial capability of the company. The two airlines cannot achieve the expected success that the merger would achieve within a span of three years because the cost of operations is high. The merger presents an opportunity the airlines to expand and grow its operations globally through already established links. The change in operational cost can be measured by determining the operational changes influenced by increased financial capability of the merger compared to the individual airline's operations.

The financial capability is an independent variable that affects the operational costs of the airline. It is evident that the financial capability of the individual airlines limits the operational costs. The merger increases the financial capability of the company through the contribution from two companies. This aspect of the merger affects the possible expansion and success of the airline created. In research, it is variable that can be manipulated to create a result that is desirable. It is evident that the operational cost relies on the airline's financial capability of the company, therefore, the merger is bringing pool of resources that the created airline would use to expand its operations.

The research area is likely to have both quantitative and qualitative data, therefore, a mix of research methods can be employed to conduct the research. The American Airlines Group operational cost evidence can be collected through quantitative data collection methods that include quantitative observations and quantitative surveys. Quantitative observation can be done by counting the number of passengers that could access the services given by the airlines. The merger plans to increased aircraft capacity is a change that can be quantified through passenger data stored in the newly created airline's database. The change is expected to increase the operational cost of the airlines which can be measured and the opportunity created by the merger can be identified.

Quantitative surveys can be administered to the customers of the airlines to determine the impact of the change brought by the merger. These surveys provide closed questions to the respondents and they can only choose from the options given. These surveys can be administered asking the change in the financial expenditure of the customers and how much the merger has impacted their choice of airlines. This form of data collection allows the researcher to create generalizations and provide a scope to the impact of the merger.

The financial capability of the airline increased compared to the individual airlines whose budget was limited due to few destinations plied. From projections made by the merger company and business experts, it is evident that there would be an increase in the earnings and growth. The merger increases its presence in the airline industry consequently reducing completion from fierce rivals including the Delta Airlines. Evidence of increased financial capability can be identified through quantitative data collection method such company survey audits. This would be used to establish the expenditure of individual companies and the change in the expenditure of the merger airline. The financial capability of the merger airline is higher as the operational costs is expected to rise due to increase in the scope of operations. The merger presents a wider market that the airline has to retain and increase its presence. The pool of resources brought by the two companies provides an opportunity for the merger to expand its market reach.

The use of the qualitative data collection method identified provide valid data because they provide the expected data. Quantitative data from the airlines can be collected using a qualitative method such as a survey of audits from the company. It provides specific information that the researcher requires to establish a change experienced by the airline. The research method provides the reality of the changes the airline has experienced. The methods used can be used to administer research on other airlines which have gone through the experience and the chances pf replicating the findings is high. The method of collection is suitable for research on airline industry as they have a greater chance of providing actual information. For example, the use of quantitative observation is suitable for the study as it requires a researcher to search number of passengers that have used the airline since the merger and compare to the number of passengers that previously used the individual airline (Carmines & Zeller, 1979). 

References

Carmines, E. G. & Zeller, R. A. (1979). Quantitative Applications in the Social Sciences: Reliability and validity assessment : SAGE Publications Ltd doi: 10.4135/9781412985642

Reed, T., & Reed, D. (2014). American airlines, us airways and the creation of the world's largest airline. Retrieved from http://ebookcentral.proquest.com