United and Continental Reach for the Sky
Reviewer: CharlesNewman, PhD Abstract
The Bloomberg Businessweek article "United and Continental Reach for the Sky" (May 17, 2010) discusses the merger of United Airlines and Continental. The U.S. aviation history is littered with the debris of airline mergers. Jeff Smisek, the CEO to be of the combined airline, will have to figure out a way to generate profits at the combined carrier after annual losses at UAL and Continental in each of the past two years. He will have to navigate a tough U.S. antitrust review and work with restive unions that had demanded the ouster of United CEO Glenn Tilton, who is staying on as nonexecutive chairman of the combined carrier.
Key to Smisek's success will be his ability to realize $1.2 billion in combined cost savings and new revenue, while funneling additional traffic from the expanded United-Continental domestic network into its more lucrative international routes. Just managing the sheer logistics of the combined airlines will be a huge undertaking. Traditionally, the key task has been harmonizing work rules and consolidating union seniority lists into a single worker roster. Smisek must also convince regulators that the Continental-United marriage will not significantly reduce competition. Some industry insiders believe regulators may force route divestitures or the sale of some of United and Continental's takeoff and landing slots at coveted airports in the New York and Washington areas.
Discussion Questions
1. Discuss the structural characteristics of the airline industry from the point of view of the Porter Five Forces framework. To help you answer this question here is a link to further information The Industry Handbook: The Airline Industry . Feel free to find and cite other information sources as well.
2. Discuss the United-Continental merger from the perspective of the Acquisition Integration Approaches framework.
3. Discuss the United-Continental merger from the perspective of the Competitive Advantage