Reason behind Delta and Southwest Merger

 Rationale behind Delta and Northwest Merger Essay

Business Finance

Made by student ID Number:

Word count: 2705 words

Moscow, 2011

Stand of articles

Executive summary4


1 . The rationale in back of Delta and Northwest merger6

2 . The synergies which may result from the merger9

3. Challenges that Delta may face to make the merger successful13

4. The future business prospects of Delta post merger14



Executive brief summary

CURRENT REPORT HANDLES EVALUATION OF THE MERGER FROM THE TWO ALL OF US AIRLINES – DELTA AND NORTHWEST. THE REASON WHY FOR MERGER DECLARED BY NEW FIRM BECAME GEOGRAPHIC EXPANSION, SYNERGY GAINS AND INCREASE IN MARKETPLACE POWER. FURTHER MORE EXAMINATION OF THE MERGER REASONS LEADS TO 1 RATIONALE: AID COMPETITIVENESS THROUGH INCREASED BUSINESS AND LOW ECONOMY OF SCALE. Analysis of the financial and operating data shows that the true explanation for the airlines merger is to leverage Northwest procedures through Delta knowledge and experience copy. The main difficulties Delta may face to create merger effective are development in gasoline prices and hard pressure of affordable airlines. Delta is sure to boost its navy and routine service staff to get cost effectiveness in the long run. The capacity cutbacks will be short term measures. To remain rewarding the US aircarrier industry may consolidate because of costs progress. Introduction

CURRENT SURVEY DEALS WITH EVALUATION OF THE MERGER OF THE TWO COMPANIES – DELTA AND NORTHWEST. Both carriers are large worldwide market players, have managed since 1920s and began facing economic problems since 2000s following terrorist episodes on Sept 11, 2001. In june 2006 the air carriers filed intended for bankruptcy court docket protection got being strike hard by simply competition coming from low cost flight companies and embrace jet gas prices. Regardless of approved and implemented reorganization plans the carriers nonetheless suffered losses. In Oct 2008 Delta merged with Northwest provided birth towards the world's major airline in terms of revenue passenger kilometers. The main reason for the airlines merger announced by management in the two firms was seeking for financial balance through synergy in procedures. Further dialogue is devoted to reasons and pay-offs of the merger and challenges and future leads Delta will face. 1 ) The rationale in back of Delta and Northwest merger

SINCE THE MAIN TARGET OF ANY KIND OF CORPORATION'S SUPERVISION TEAM IS DEFINITELY THE MAXIMIZING OF SHAREHOLDERS VALUE, NON-VALUE MAXIMIZING MOTIVES OF DELTA AND NORTHWEST FLIGHT COMPANIES MANAGEMENTS FOR THE MERGER IN THE TWO BUSINESSES ARE UNKNOWN, VALUE-INCREASING MOTIVES JUST ARE CONSIDERED FURTHER MORE (MEGGINSON AINSI QUE ALL, 2008). Considering general motives of merger activities discussed by simply Pautler (2001) and Megginson et all (2008) the airlines merger pursued the subsequent objectives: geographic expansion, synergy and industry power. Geographic expansion

As both the airlines compliment each other well a new combined company was expected to boost revenue credited the increased market share because of consolidation from the airlines global networks. Certainly Delta contains a large Western european and Latin American occurrence and Southwest has an considerable Asian network, however the combined company released nothing about purposeful demand stimulation – size of organization alone won't be able to influence this. Synergy

Merged business was released to provide regarding $1 billion in cost efficiencies main that are costs savings, basically from the better use of aircraft, reduced overhead and an improved cost-overhead structure. Moreover Delta was likely to use their new size to ease its access to mass items like gas in terms of selling price and leverage (Kim, 2008) Certain arguments towards the reason are...


Delta airlines Incorporation

Dooley George (2008), Delta/Northwest Merger makes agents careful, TravelAgent

Fabey Michael (2008), Analysts consider long-term effect of Delta-Northwest merger, Travel weekly,

Hinton Christopher (2008), Delta, Northwest reach for 'best-in-class ' status, MarketWatch

Pautler P. A

Kim Ed (2008c), Issues With The Delta-Northwest Merger - Part 2, Sensible Risk Management, offered by

Megginson W., Intelligent S., Lucey B

Wagner Mark (2008), Delta-Northwest can jumpstart consolidation, NewsBriefs

Delta and Northwest Merge, Creating Premier Global Airline (2008), Delta Airlines

Delta and Southwest State Improved Integration Prediction (2008), Merges& Acquisitions,

Delta, Southwest on Standby (2008), Atmosphere Cargo Globe, Vol

Southwest and Delta Join Finally (2008), NewsBriefs




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