...Journal of Industrial Organization Education Volume 5, Issue 1 2010 Article 1 United-Continental Merger Robert J. Carbaugh, Central Washington University Koushik Ghosh, Central Washington University Recommended Citation: Carbaugh, Robert J. and Ghosh, Koushik (2010) "United-Continental Merger," Journal of Industrial Organization Education: Vol. 5: Iss. 1, Article 1. DOI: 10.2202/1935-5041.1034 Unauthenticated | 62.189.189.132 Download Date | 6/6/13 12:08 PM United-Continental Merger Robert J. Carbaugh and Koushik Ghosh Abstract This case study discusses the nature and likely effects of the proposed merger between United and Continental. It is intended as a lecture for instructors teaching undergraduate courses in Industrial Organization or Antitrust Economics KEYWORDS: United, Continental, Merger, Antitrust Unauthenticated | 62.189.189.132 Download Date | 6/6/13 12:08 PM Carbaugh and Ghosh: United-Continental Merger United-Continental Merger On May 2, 2010, the Boards of Directors at United Airlines and Continental Airlines approved a stock-swap deal that will combine them into the world’s largest airline. The combined carrier will have 21 percent of domestic flying capacity, taking the lead from Delta Air Lines, which will lose what had been its leading 20 percent share of the domestic market. The deal still needs final approval from the U.S. Department of Justice and shareholders before being allowed to go forward. The firms hope to complete...
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...air travel demand over the next few months beginning at the end of 2009. At the end of 2009, the reported traffic statistics at many major carriers showed improving demand and revenues . Therefore, it is reasonable that the U.S. airline industry could be undergoing the start of fundamental industry demand improvement. In addition, since the industry has already reduced capacity levels, it should be able to raise fares as passenger travel demand improves. Even though oil and jet fuel prices is up sharply from 52-week lows, they are still notably lower than in 2008 , which should ease cash usage throughout the group and allow good entry points into new fuel hedge positions, thereby offering protection if oil spikes again. According to S&P, the top 10 U.S. carriers lost about $5 billion in 2009, after a $4 billion loss in 2008, as the benefit of lower jet fuel costs was eroded by lower airfares and falling passenger levels. Results in 2008 were impacted by record high oil prices. Airlines have cut fares in response to weakening demand, but we think recent cuts to domestic and international supply could help restore some pricing power. For 2010, S&P estimates a net profit of about $2.0 billion for the top 10 U.S. major airlines Continental Airlines, Inc. –SWOT Analysis Continental Airlines is a major U.S. air carrier engaged in the business of transporting passengers, cargo and mail. The company has a strong market presence and a robust hub system. The company would be...
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...Beagle has established itself as a pioneer in new product development. However they have developed products to the point of maturity in the product life-cycle, only to lose to competitors able to produce and supply similar equipment on the basis of faster service. The question of service revolves around order cycle time, which is particularly important to customers lying at significant distances from the plant. Recent cases where the salesmen had specified « ship via premium transportation », considerably more expensive than the normal shipment cost but with considerable service improvement, had awakened management to the need to improve service especially for distant customers. Beagle’s present shipment policy is to ship directly from their plant-based distribution centre ( DC ) to the customer using less-than-truckload ( LTL ) movement provided by a continental haulage/distribution company Continental Carriers. Shipment sizes range from 300 to 2,000 lbs and sales are made on a delivered-price basis giving Beagle control over the transportation costs. Continental gives useful additional services such as computerised tracing and an expedited claims service on...
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...Introduction Continental Carriers Inc is a trucking company which specialises in transporting general commodities. Since its establishment in 1952 the company operates within the district of the Pacific Coast and from Chicago to various points in Texas. It was noted that the company maintains an overall low debt policy, whereby they obtain infrequent short term loans and avoid long term debt. Furthermore with the appointment of Mr. Evans as president, the company became more profitable and experienced internal growth through intensive marketing and computerisation of operations. In order for the company to continue expanding its revenues the president Mr. Evans advocated the acquisition of Midland Freight. External financing of $50 million would be required to accomplish this goal. However, the directors have a difficult challenge with regard to the appropriate method of financing. Through extensive discussion and evaluation the directors identified three distinct options, namely, selling $50 million in bonds at a 10% interest rate to a California Insurance Company or issuing 3 million in common stocks at $17.75 per share with a dividend rate of $1.50 per share or issuing 500 000 preference shares at a par of $100 per share and with a dividend rate of $10.50 per share (See appendix A for case assumptions). Discussion 1. Given the nature of CCI’s business how much debt can it support? Continental Carriers Inc. must possess certain organizational and structural characteristics...
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...Harvard Business School 9-291-080 rP os t June 25, 1991 Continental Carriers, Inc. op yo In May 1988, Elizabeth Thorp, treasurer of Continental Carriers, Inc. (CCI) was considering the advantages and disadvantages of several alternative methods of financing CCI’s acquisition of Midland Freight, Inc. At a recent meeting of the board of directors, there had been substantial disagreement as to the best method of financing the acquisition. After the meeting Ms. Thorp was asked by John Evans, president of CCI, to assess the arguments presented by the various directors and to outline a position to be taken by the management at the June directors’ meeting. CCI was a regulated general commodities motor carrier whose routes ran the length of the Pacific Coast, from Oregon and California to the industrial Midwest, and from Chicago to several points in Texas. Founded in 1952 by three brothers, the firm experienced little growth until the mid1970s. At that point Mr. Evans joined the firm as president after many years as an executive of a major eastern carrier. Mr. Evans first concentrated his efforts on expanding CCI’s revenues on existing routes through an intensive marketing effort and a renewed emphasis on improving service. In 1982, utilizing the proceeds of CCI’s initial public offering of common stock, Mr. Evans began a program designed to reduce operating costs through a combination of extensive computerization of operations and improvement in terminal facilities. As a result...
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...OVERVIEW OF THE CASE In 2002 Delta airlines faced the unfortunate realization that the competition from low cost carriers like Southwest and JetBlue was becoming a serious problem. Even though Delta had been looking at this problem for a long period of time, the business model of Delta Airlines was organized by function and their solutions generally focused on individual aspects of the firm. For example, the marketing department provided marketing ideas, the customer service department offered customer related solutions etc. Delta realized that they did not have a comprehensive solution to dealing with the low cost carriers in the market. One of the simplest solutions proposed by Delta management was the idea that Delta could launch its own low cost subsidiary, however, looking at the rest of the airline industry, low cost subsidiaries seemed to be ideas that were either immediate failures or unsustainable over time. According to experts, they had “never seen a high-cost carrier transform itself into a low cost carrier”. With or without this option, Delta would have to find a solution to this problem. The airline industry in the United States is immense, with more than 620 million passengers and over $81 billion in fares in 2001 alone. Unfortunately, while immense in size, in terms of profit, the airline industry continued to perform below the average for other industries. Many investments made by the larger carriers were not profitable and the tragedy of 9/11 put more pressure...
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...bankruptcy proceeding. In general, bankruptcies can be categorized into two types: liquidation and reorganization. The U.S. Court of Bankruptcy (2015), states that among the popular proceedings are chapters 7, 11, 12, and 13, which individuals and businesses use to file. Chapter 7 bankruptcies normally fall into the liquidation category. This means that an individual’s own property can be taken away and sold in the process of liquidation in order to pay back the debts. Conversely, chapter 13 bankruptcies fall under the reorganization category, meaning that the individuals will probably be able to keep their property, but they must submit and stick to a plan that will allow the person to repay some or all of their debts within 3 to 5 years. A case filed under chapter 11 of the United States bankruptcy code is frequently referred to as a reorganization bankruptcy. Its bankruptcy proceedings are usually employed by struggling businesses as a way to get their affairs in order and pay off their debts. In addition, some individuals also file for chapter 11 bankruptcy when they are not eligible for chapter 13 bankruptcy or own large amount of non-exempt property (like a home). However, chapter 11 can be much more expensive and time consuming when compared to chapter 13, and the individual will probably need to speak to a lawyer to decide whether chapter 11 is the right pick for them (U.S. Court for Bankruptcy, 2015). The chapter 12...
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...American Airlines Strategic Report for American Airlines Jed Cullen Kevin Yamazaki Deirdre Chew April 7, 2010 April 7, 2010 Page 1 American Airlines Table of Contents Executive Summary ............................................................................................ 3 Company History................................................................................................. 4 Financial Analysis ............................................................................................... 8 Current Financial Position.................................................................................. 8 Industry Comparable Analysis ......................................................................... 12 Stock Performance .......................................................................................... 14 Management and Analyst Outlook................................................................... 15 Competitive Analysis ........................................................................................ 16 Internal Rivalry ................................................................................................. 17 Supplier Power ................................................................................................ 18 Buyer Power .................................................................................................... 19 Entry and Exit ..............
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...FNCE90013 Case Studies in Finance SUBJECT GUIDE July – August, 2015 Prepared by George Kester Department of Finance Faculty of Business and Economics Objective To develop an understanding of applied corporate finance including financial analysis and forecasting, financing sales growth, short-term versus long-term financing, capital structure policy, capital investment analysis, cost of capital, and company valuation. The course will be experiential and focus upon selected Harvard Business School cases describing actual business situations faced by financial managers, requiring analysis, and decision-making. Professor Professor George W. Kester Texts Robert C. Higgins, Analysis for Financial Management (10th Editon), McGraw-Hill Irwin, 2012. Cases You should read and analyze each assigned case. The cases are available on the LMS page for FNCE90013. Readings Selected readings will be distributed during the course. Group Study It is recommended that you form yourselves into small study groups for the purpose of routinely reviewing and discussing assigned before each class. Your learning experience will be enhanced by such interaction and you will be better prepared for class. Presentations Copies of the PowerPoint slides of the presentations are available on the LMS page for FNCE90013. It is recommended that you print them out prior to each class. Attendance The class attendance will be taken. Participation ...
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...United Airlines vs. Delta Airlines Ushma S. Patel 3/31/2013 Ushma821@gmail.com Work Cited 1. Introduction 3 2. United Airlines vs Delta Airlines 4 3. The Four-Frame Model 8 4. SWOT Analysis- United Airlines 12 5. SWOT Analysis- Delta Airlines 14 6. Analysis 15 7. Recommedations 16 8. Work Cited 17 INTRODUCTION In evaluating two companies who have had to restructure their business models to evolve to changing times I choose United Airlines and Delta Airlines. Both companies filled for bankruptcy in the early 2000’s and since then have nursed their company back to health and to becoming the industries leaders for airlines. I choose these two airlines because I frequently use them to travel. My family are also huge travelers and I spend a lot of time looking for the best deals for them. United Airlines filed for bankruptcy in 2002 and would become the longest case in the United States lasting until 2006. The airline was able to get their reorganization plan approved by the United States government by restructuring their management plan. In the restructure they also changed how their bonus plan was organized for successful executives. They also had to evaluate their employee’s efficiency while on the clock. They were able to reduce their workforce from 100,000 employees to half of that. Finally the airline had to revaluate the routes they were taking and then see which ones...
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...GM 588 6/20/2012 Dr. Kim Hunley INTRODUCTION United Airlines is a major airline based in the United States and one of the world’s largest airlines. It was formed in 1934. It is a subsidiary of United Continental Holdings Inc. Its headquarters are located in Chicago, IL. United is a founding member of the Star Alliance, the largest alliance in the world. On October 1, 2010 United and Continental airlines merged together forming the world’s largest airline in revenue passenger miles and second largest in fleet size and destinations. “The new United will offer customers an enhanced travel experience, combining the best products and services each carrier has to offer,” (The World's Leading Airline, 2012). The airline is supposed to be the airline that customers want to fly, the airline employees want to work for and the airline shareholders want to invest in. The key highlights of the merger are the following: * World’s most comprehensive global network, including world class international gateways to Asia, Europe, Latin America, Africa and Middle East with non-stop or one stop service from virtually anywhere in the United States * Most modern and fuel-efficient fleet and the best new aircraft order book, among U.S. network carriers * Industry-leading frequent flyer program that will provide more opportunities to earn and redeem miles worldwide * Optimal hub locations in 10 cities, including hubs in the four largest cities in the United States ...
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...the provided space (rectangle). The space will expand to accommodate your writing. Please use “Marriage at 30,000 Feet”as the basis for answering questions 1 through 5. 1. (35 points) Combining Continental and United Airlines is tremendously difficult, largely because of the enormous number of things two airlines may do differently. Employees from both Continental and United are working side by side to answer many questions. Will passengers board flights back to front or window, middle, then aisle? Will miniature ponies be allowed? What information will be printed on a boarding pass? What direction will dog crates be faced when loaded in to cargo? Continental and United business architectures are unique to each company. Describe specifically what “the new United,” as a merged airline, must do to form the business architecture for the largest carrier in the world. Make sure you include in your description the role of standardization and integration in transition from the current As-Is to the emerging To-Be business model. | 2. (35 points) Information technology tends to be the thorniest part of an airline merger. The flight information systems and the passenger information system are critical applications (systems) supporting airline operation. Jeff Smisek, Continental CEO, was named the head of “the new United,” and he has heard a lot about cloud computing and virtualization. Mr. Smisek has learned that competitors are implementing cloud computing and virtualization...
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...the document subtitle] | | 6/15/2011 | INTRODUCTION United Airlines is a major airline based in the United States and one of the world’s largest airlines. It was formed in 1934. It is a subsidiary of United Continental Holdings Inc. Its headquarters are located in Chicago, IL. United is a founding member of the Star Alliance, the largest alliance in the world. On October 1, 2010 United and Continental airlines merged together forming the world’s largest airline in revenue passenger miles and second largest in fleet size and destinations. “The new United will offer customers an enhanced travel experience, combining the best products and services each carrier has to offer,” (The World's Leading Airline, 2011). The airline is suppose to be the airline that customers want to fly, the airline employees want to work for and the airline shareholders want to invest in. The key highlights of the merger are the following: * World’s most comprehensive global network, including world class international gateways to Asia, Europe, Latin America, Africa and Middle East with non-stop or one stop service from virtually anywhere in the United States * Most modern and fuel-efficient fleet and the best new aircraft order book, among U.S. network carriers * Industry-leading frequent flyer program that will provide more opportunities to earn and redeem miles worldwide * Optimal hub locations in 10 cities, including hubs in the four largest cities in the United States ...
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...SOUTHWEST’S PENDING ACQUISITION OF AIRTRAN: ANALYSIS OF THE CASE AND STRATEGIC CONSIDERATION BMA 5013: Corporate Strategy Jacob Dreizin Rudiger Hesse Robert Martinez Lee Vu Hoang Nhat Victor Ka Sing Tsui Executive Summary On September 27th, 2010, Southwest Airlines announced its intention to buy AirTran Airways for $1.4 billion, with the merger being effected within two years. Although by number of planes, AirTran is just slightly more than one-quarter the size of Southwest, the number of routes that each airline presently flies is the same. We anticipate that the intended merger will thus affect the latter far more than might be suggested by the fleet size indicator. Indeed, if the U.S. Government approves the merger, Southwest would become a different entity. It would transform from a primarily regional airline into a national one, becoming America’s third-largest carrier by number of passengers flown. Its fleet would increase by over 25 percent, and it would fly two airplane types—the Boeing 717 and 737—rather than just one. Moreover, having acquired AirTran’s hub operations in Atlanta, currently the world’s busiest airport, Southwest would, for the first time, come into direct competition with Delta, the number two U.S. airline by number of passengers flown, which also claims Atlanta as its main hub. It would also take over AirTran’s Caribbean routes, thus gaining its first international operations. Our analysis will first provide a background of the U.S...
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...Human Resource Management Delta Case Study: Improving Delta’s Profit Margin Written by Filiz McNamara, Ogochukwu Udekwe and Vicki Troftgruben February 21, 2011 Table of Contents Page Introduction 3 External Environment 3 Internal Environment 18 Systems and Stakeholder Analysis 32 Conclusion 34 Problem Identification 36 Generation and Evaluation of Alternatives 37 Recommendation 38 Decision Implementation 39 References 40 Introduction Delta Airlines was founded by C.E. Woolman, an agriculture extension agent (Anthony, Kacmar, & Perrewe, 2010). C.E Woolman was not a banker, venture capitalist or war pilot, as many of the competing airlines were. He didn’t have the aggressive military style that many of the other airline founders had. What C.E. Woolman instilled within the employees at all levels of the organization is that people matter and should be treated fairly and equitably. This philosophy led Delta Airlines to be the leader in customer service from the company’s inception through the many mergers over the years. Through the difficult financial times when other airlines were laying off employees and filing for bankruptcy, Delta continued to pay their people well and keep them employed. There was an exception during the Ronald Allen CEO era of 1987 thru 1997. Human relations took a significant down turn during his tenure as CEO, especially during 1993 and 1994, but Delta decided to part ways with Allen and began repairing...
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