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But the two companies are currently in merger talks that would make U.S. Airways the second largest airline. The industry reported a $60 billion dollar loss since 2000 which has spurred interest in consolidation. Even with the dramatic declines in capacity by airlines collectively, in recent years, experts believe that there are too many airlines and a shortage in travelers. A merger could help both increase the earnings per share in a smaller timeframe than either company can accomplish alone.
But mergers in the airline industry have been difficult to pull off, in part because complex labor contracts can offset the promised cost savings. Delta and Northwestern recently merged, creating the nation's largest carrier after two years of implementation. William S. Swelbar, (research engineer at ICAT based at MIT) explained that "The success of the Delta-Northwest merger is reinvigorating consolidation discussions in the industry," A factor contributing to the success of that merger was the seniority plan and new collective bargaining agreement with the pilots, negotiated between the two companies, enabling the two companies to integrate their operations faster and more smoothly (Sorkin, 2010). U.S. Airways still has yet to integrate pilot seniority since its merger with America West in 2005. The labor issue could turn out to be the biggest hurdle to overcome in any merger with United.
As a generic strategy the company should attempt increase code shares and attempt to consume competitors. Mergers and codeshare agreements have been the critical factors contributing to recent expansion in the airline industry but more specifically for U.S. Airways. In August, U.S. Airways negotiated with...
Airways to expand its services at its focus point of Ronald Reagan Washington National Airport. This negotiation gave U.S. Airways access to critical business centers in both Brazil and Japan. U.S. Airways is positioned obtain 42 pairs of Delta's slots at Ronald Reagan Washington National Airport and to acquire the rights to expand to Tokyo, Japan and Sao Paulo, Brazil.
References
Corridore, Jim. "Airlines."Standard and PoorsNetAdvantage. www.netadvantage.standardpoor.com.online.library.marist.edu/NASApp/NetAdvantage/showIndustrySurvey.do?code=air (accessed May 14, 2011).
Crutsinger, Martin. "IMF: U.S. economy slowing but global growth gaining USATODAY.com." News, Travel, Weather, Entertainment, Sports, Technology, U.S. & World - USATODAY.com. http://www.usatoday.com/money/economy/2010-10-06-imf-economic-forecast_N.htm (accessed May 14, 2011).
Bureau of Labor Statistics Graph: "The cost of airline fares and lodging away from home" http://3.bp.blogspot.com/_ugWk-rnkqXM/SYMF82UCWcI/AAAAAAAAD6U/eRlBYBU4j7s/s400/IATA+Performance+Month+Dec+2008.png (Accessed May 14, 2011).
Reed, Ted. "U.S. Airways Pilots to Seek New Union." TheStreet.com. http://www.thestreet.com/s/us-airways-pilots-to-seek-new-union/newsanalysis/transportation/10382899.html. (accessed May 14, 2011).
Sorkin, Andrew R. "United Is in Merger Talks With U.S. Airways." April 7, 2010.http://www.nytimes.com/2010/04/08/business/08air.html?_r=1&ref=us-airways-group-inc (accessed May, 14, 2011).
U.S. Bureau of Labor Statistics. Employment Situation Summary." http://www.bls.gov/news.release/empsit.nr0.htm (accessed May 14, 2011).
US Airways competes with a Differentiation Strategy on a global scale. As this airline has a very broad market scope, as evidenced by the myriad of routes, aircraft, service and loyalty levels the company has in place, the Differentiation Strategy aligns best to their business model. The Differentiation Strategy for U.S. Airways is also supported by hwo the company chooses to use price optimization and code sharing throughout the airline
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