Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

Case Study SWOT Analysis Solution

Case Study Description of Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel

This sequel accompanies case number 2044.0. In August 2013, the Antitrust Division of the Department of Justice (DOJ) shocked many in the airline industry by filing a lawsuit to block the merger of American Airlines and US Airways on the grounds that the merger would reduce competition. The two airlines had announced their intention to merge in February, making way for the creation of the largest airline in the world. The new airline would carry roughly 200 million passengers a year, employ more than 100,000 workers, and have total revenues of nearly $40 billion. The American Airlines-US Airways merger was only the latest, albeit the largest, in a recent spate of airline mergers. During the first decade of the twenty-first century, the airline industry had been plagued by economic recession, high fuel prices, record losses and bankruptcies. Starting in the mid-2000s, airline executives responded with an aggressive program of consolidation. Mega deals, such as the merger of Delta and Northwest (in 2008), United and Continental (2010), and, Southwest and AirTran (2011), had dramatically reshaped the industry. If approved by federal authorities, the merger between American Airlines and US Airways would leave four major airlines (American, Delta, United and Southwest) in control of 80 percent of the domestic market, down from nine major carriers in 2005. Part A of this case summarizes the historical ups and downs of the volatile US airline industry, the concerns raised by the DOJ and the responses of American Airlines and US Airways, and asks students to weigh the evidence and determine if the advantages of combining the two airlines outweigh the potential harm to consumers. The case sequel describes how the DOJ eventually settled the lawsuit with the airlines, after American agreed to divest slots and gates at several airports in November 2013.

Authors :: Jose Gomez-Ibanez, Anjani Datla

Topics :: Global Business

Tags :: Financial management, Government, Market research, Mergers & acquisitions, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis

Swot Analysis of "Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel" written by Jose Gomez-Ibanez, Anjani Datla includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Airlines Airline facing as an external strategic factors. Some of the topics covered in Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel case study are - Strategic Management Strategies, Financial management, Government, Market research, Mergers & acquisitions and Global Business.

Some of the macro environment factors that can be used to understand the Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, increasing energy prices, increasing commodity prices, challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Airlines Airline, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Airlines Airline operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel can be done for the following purposes –
1. Strategic planning using facts provided in Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel case study
2. Improving business portfolio management of Airlines Airline
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Airlines Airline

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Strengths Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Airlines Airline in Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel Harvard Business Review case study are -

Diverse revenue streams

– Airlines Airline is present in almost all the verticals within the industry. This has provided firm in Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

Innovation driven organization

– Airlines Airline is one of the most innovative firm in sector. Manager in Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.

Learning organization

- Airlines Airline is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Airlines Airline is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel Harvard Business Review case study emphasize – knowledge, initiative, and innovation.

Training and development

– Airlines Airline has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Ability to lead change in Global Business field

– Airlines Airline is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Airlines Airline in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Digital Transformation in Global Business segment

- digital transformation varies from industry to industry. For Airlines Airline digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Airlines Airline has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Low bargaining power of suppliers

– Suppliers of Airlines Airline in the sector have low bargaining power. Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Airlines Airline to manage not only supply disruptions but also source products at highly competitive prices.

Superior customer experience

– The customer experience strategy of Airlines Airline in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Cross disciplinary teams

– Horizontal connected teams at the Airlines Airline are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Organizational Resilience of Airlines Airline

– The covid-19 pandemic has put organizational resilience at the centre of everthing that Airlines Airline does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High switching costs

– The high switching costs that Airlines Airline has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.

Effective Research and Development (R&D)

– Airlines Airline has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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Weaknesses Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel are -

High bargaining power of channel partners

– Because of the regulatory requirements, Jose Gomez-Ibanez, Anjani Datla suggests that, Airlines Airline is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.

Low market penetration in new markets

– Outside its home market of Airlines Airline, firm in the HBR case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Compensation and incentives

– The revenue per employee as mentioned in the HBR case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel, is just above the industry average. Airlines Airline needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Airlines Airline is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.

Interest costs

– Compare to the competition, Airlines Airline has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Ability to respond to the competition

– As the decision making is very deliberative, highlighted in the case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel, in the dynamic environment Airlines Airline has struggled to respond to the nimble upstart competition. Airlines Airline has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High operating costs

– Compare to the competitors, firm in the HBR case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Airlines Airline 's lucrative customers.

Capital Spending Reduction

– Even during the low interest decade, Airlines Airline has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.

Slow to strategic competitive environment developments

– As Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel HBR case study mentions - Airlines Airline takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.

No frontier risks strategy

– After analyzing the HBR case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

Lack of clear differentiation of Airlines Airline products

– To increase the profitability and margins on the products, Airlines Airline needs to provide more differentiated products than what it is currently offering in the marketplace.

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Opportunities Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities highlighted in the Harvard Business Review case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel are -

Use of Bitcoin and other crypto currencies for transactions

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Airlines Airline in the consumer business. Now Airlines Airline can target international markets with far fewer capital restrictions requirements than the existing system.

Loyalty marketing

– Airlines Airline has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.

Low interest rates

– Even though inflation is raising its head in most developed economies, Airlines Airline can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Airlines Airline is facing challenges because of the dominance of functional experts in the organization. Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Better consumer reach

– The expansion of the 5G network will help Airlines Airline to increase its market reach. Airlines Airline will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Learning at scale

– Online learning technologies has now opened space for Airlines Airline to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Leveraging digital technologies

– Airlines Airline can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Airlines Airline can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Developing new processes and practices

– Airlines Airline can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.

Using analytics as competitive advantage

– Airlines Airline has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Airlines Airline to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Manufacturing automation

– Airlines Airline can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Building a culture of innovation

– managers at Airlines Airline can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.

Creating value in data economy

– The success of analytics program of Airlines Airline has opened avenues for new revenue streams for the organization in the industry. This can help Airlines Airline to build a more holistic ecosystem as suggested in the Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel case study. Airlines Airline can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.

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Threats Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats mentioned in the HBR case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel are -

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Instability in the European markets

– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Airlines Airline will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Airlines Airline with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.

Shortening product life cycle

– it is one of the major threat that Airlines Airline is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Stagnating economy with rate increase

– Airlines Airline can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.

Easy access to finance

– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Airlines Airline can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Airlines Airline business can come under increasing regulations regarding data privacy, data security, etc.

Environmental challenges

– Airlines Airline needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Airlines Airline can take advantage of this fund but it will also bring new competitors in the Global Business industry.

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Airlines Airline in the Global Business sector and impact the bottomline of the organization.

Consumer confidence and its impact on Airlines Airline demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.

Technology acceleration in Forth Industrial Revolution

– Airlines Airline has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Airlines Airline needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Airlines Airline can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel .

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Weighted SWOT Analysis of Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of the case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of the Harvard case study Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Airlines and Antitrust: Scrutinizing the American Airlines-US Airways Merger Sequel is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Airlines Airline needs to make to build a sustainable competitive advantage.

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