In December of 2013, American Airlines and US Airways have completed their long awaited merger to create the world’s largest airline. Earlier in 2013, the merger was blocked by the United States Justice Department due to concerns that the merger would adversely affect competition in the airline industry of the United States. In order to reach a settlement, American Airlines and US Airways agreed to give up several hundred gates at airports across the United States. Now the companies expect to save over one billion dollars in synergy with the merger. This merger will undoubtedly have a variety of effects on the global airline industry.
While cross-border mergers and acquisitions serve as an important strategy to increase the international competitiveness of a company, mergers between domestic companies can actually have similar effects. In fact, one of the reasons why US Airways merged with American Airlines was to remain competitive in international markets in the midst of intense pressures from foreign carriers. Now, the newly merged airline is planning to provide flights to more than 50 countries. Expanding its service to other countries was made possible by the domestic merger.
Despite becoming competitive on an international level, many consumers fear that domestic mergers create higher prices in the domestic marketplace due to consolidation of competition. What do you think will be the long-term effects of the merger between US Airways and American Airlines on a domestic and international level? Let us know by leaving a comment below!