Case Study 1

Read Case 7-2 titled “Airline Consolidations”. You are to write an essay that provides comprehensive answers to all four questions listed at the end of the Case Study. Answers to the questions are to be presented within your essay (not as bullet points or numbered lists). Critical thinking skills are essential when analyzing the case.

Answering the questions requires you to reference the textbook material. The EU library is excellent place to start when looking for additional sources. Text portion of each answer needs to be a minimum of two pages long and follow the APA-7 format. Make sure to include a cover page and references page.  Comprehensive and all inclusive answers are required in order to receive full credit. College level work is expected. Students are graded on critical thinking, research, and writing.

 

“252CHAPTER 7252CHAPTER 7CASE 7-2Airline ConsolidationsAccording  to  Airlines  for  America,  there  have  been  approximately  51  airline  mergers/acquisitions since 1930. Although this is not necessarily a verifiable number, it does show the magnitude of the consolidations that have taken place in the passenger airline industry. Probably  the  most  significant  combinations  of  carriers  began  in  2009  with  Delta  and  Northwest, followed by United and Continental in 2010, Southwest and Airtran in 2011, and American and U.S. Airways in 2013. These four “mega-carriers” account for approximately 80 percent of all domestic airline passengers today.The Airline Deregulation Act of 1978 was intended to open the passenger market to new entrants to increase the level of competition. Since then, however, there have been no new entrants into the traditional hub-and-spoke airline market. While there have been a few successful entrants into the market (for example, Southwest), they were point-to-point airlines  that  did  not  compete  against  the  legacy  hub-and-spoke  carriers  (for  example,  United).

 

CASE QUESTIONS

1.Based on publicly available data, compare the four mega-carriers across the following characteristics:a.Number of aircraft by type;b.Number of employees;c.Departures;d.Revenue passengers;e.Revenue passenger miles;f.Available seat miles;g.Operating revenue (total);h.Operating revenue per seat mile;i.Operating profit.

2.Knowing the intent of the Airline Deregulation Act of 1978, explain why the number of passenger airlines in the industry has actually decreased. Be sure to include a discussion of barriers to entry in your explanation.

3.With the total U.S. market being oligopolistic in nature and at some hubs monopolistic, should  the  federal  government  take  steps  to  impose  economic  regulation  on  the  passenger airlines again? Explain your opinion.

4.In your opinion, why did the Justice Department allow such consolidations to take place?”

Just one page is fine