Airlines and mergers:
Introduction:
In United States All airlines were effected with the oil price hike in 2008 along with financial crisis, which resulted in fall in business class travelers in the airlines. South West Airlines is one of the several carriers which have shown excellence in tolerating the crisis. Cost leadership of the airlines proved to be right strategy and enabled the organization to tolerate the falling ticket prices as well as the rising operating costs. The following part of the discussion focuses on different aspects of the strategies and consequences occurred during this time with particular focus to the south west Airlines and other major players of that time. Also provided discussion on the consequences and the successes of the major players of the domain of that time.
(i)Consolidation and the consequences of consolidation on Airlines revenues:
Airlines during the times of crisis are opting for consolidation. Consolidation will offer the airlines a myriad of advantages and flexibility in charging the fares as they like. Firstly consolidation of airways will work out to reduce the impact of the competitors on the airways operations. Firstly, when the merger and consolidation is done with a low cost operating competitor, there will be immediate impact of the same on the airlines operations. The consolidation will offer the airlines flexibility to control the services, they may stop some of the services which are not very profit effective and will let the operators fix their prices as there is less opportunity for the passengers. Secondly, it is possible to take up more effective strategies to optimize the operations of the airlines to optimize the cost-benefit ratios. Also the airlines do have unique opportunity to set the additional prices like surcharges on fuels, additional surcharges for unaccompanied minors, surcharges for carrying the pets on board etc. All this will provide cost advantage and benefit optimization for the companies operating in the airlines (Bena, 2014).
(ii) Disadvantages of consolidation:
Consolidation of airlines do have disadvantages to both the airlines as well as to the passengers. Passengers will lose the choice as the organizations will gain monopoly on the fixed routes and this in turn will results in higher costs and possible downturn of the quality of the service to the airlines business holders. At the same time there is disadvantage to the airlines as well, particularly it is possible the consolidation may result in job losses in particular cases. If the organizations are looking to get-rid of underperforming sectors by merging with other players it will result in job-loses and will result in job insecurity in other employees of the organization. This in due course of time will escalate to damage the airlines productivity and operational effectiveness. Also there is scope that the airlines can face diseconomies of scale, the newfirm may experience diseconomies of scale due to the increased size. Employess may feel insecure and they may lose the necessary motivation to work in the organization as they feel that they are part of a very big organization and they may experience the loss of identity.