Literature Review Concept Map
The author’s strategy is to focus on the airline industry with emphasis on mergers between airlines companies. The review attempts to clearly outline grounds that precipitated a merger between Delta and Northwest Airlines as well as the benefits that this move could result in. Much of the works cited were from online articles and journals between the year 2000 and 2008. This reveals his propensity to clearly outline a progression of the history and eventual airline merger
The works cited focus on two core areas: general airline merger information and the Delta-Northwest merger. Materials collected on Airline mergers have been sourced from articles and journals from sites that host the movers and shakers of the financial industry in North America such as the Wall Street journal and the Financial Times. Not only are the works cited arranged based on the focus of the literature review but also by time. Most of the references are from material published in 2008.
The research used in this literary work is based on an industry first and two particular organizations in that industry. The consolidating of airlines in the airline industry is the core focus. The Delta-Northwest merger is a case study of such mergers. Having been regarded as one of the largest airline mergers in the history of the United States, it is the perfect case study reference to analyze the impact mergers have on the airline industry. Many believe that this merger could be a catalyst for further consolidation at a time when the industry is threatened with steep losses from rising fuel prices and a weakening economy (Raghavan, 2013).
Author-identified Limitations, Implications and Recommendations
The Delta-Northwest Airline merger created a global giant with over 800 jets, 6400 daily flights and close to $32 billion in annual revenue (Raghavan, 2013) while saving both airlines from eminent bankruptcy. Mergers are also seen as a tactic for the creation of monopolies and cartels. This will help the industry’s key players to impose restrictions on competition (Raghavan).
The most common motives for mergers are:
• Synergy
• Growth
• increasing market power
• acquiring unique capabilities and resources
• diversification
• cross-border motivations
(Raghavan, 2013)
The outcome of the Delta-Northwest merger was based on financial analysis and airline market concentration analysis. The financial advisers for both companies projected that the merger would help generate close to $2 billion in revenue. By the year 2012, the cost synergies would result in a more comprehensive and diversified route structure. Additional benefits to be realized included: effective aircraft utilization, reduced overhead costs and improved operational efficiency (Raghavan).
In conclusion, competition has not worked for the airline industry. The best option is consolidation through mergers. However, it is realized that airline mergers experience one core challenge; integration of the operations, human resources and the company cultures to create the perfect synergies. Therefore, all mergers including this one are principally dependent on whether the anticipated synergies of the merger will be realized or not (Raghavan).
Concept Map
References
Raghavan, V. S. (2013). Consolidation in the Airline Industry: The Delta-Northwest Merger. Journal of International Finance & Economics, 13(2), 89-96.a
