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Mergers, Acquisitions and Takeovers Case Study

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Case Title:

Delta-Northwest Airlines Proposed Merger: Withering Industry Turbulence?

Publication Year : 2008

Authors: Sai Prasanna Ragu, Muthu Kumar R

Industry: Aviation

Region:US

Case Code: MAA0112

Teaching Note: Available

Structured Assignment: Available

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Abstract:
Capping months of negotiations, US’ major airlines – Delta Air Lines and Northwest Airlines inched closer by finalising the merger deal. Battling against soaring fuel costs and looming demand for air travel, the world’s largest carrier intends to generate substantial revenues from scale benefits and significantly reduce duplicate costs. While their complementary routes help them gain a global footprint, sailing through antitrust approval amid labour and pilot unrest remains a challenge for both the airlines. Further, the case also delves deep into issues such as – the trigger that led to the merger drive between the two. In a consolidating and troubled industry, should mergers and acquisitions be dictated by short-term interests or long-term interests?

Pedagogical Objectives:

  • To examine the nature, business and the competitive dynamics of airline industry
  • To identify the factors that led to troubled times in the US airline industry
  • To debate on the need for Delta Air Lines to merge with Northwest Airlines and the need for Northwest Airlines to be acquired by Delta
  • To analyse and debate on the possible synergies between Delta Air Lines and Northwest Airlines
  • In a consolidating and troubled industry, which is the ideal company to be taken over – a strong player or a weak player?

Keywords : Global Civil Aviation; US Airlines; American Airlines; US Airways; United Airlines; Mergers,Acquisitions,Alliances Case Studies; Continental Airlines; Southwest Airlines; JetBlue; Low-cost Carriers (LCCs); Consolidation; Fleet inefficiencies; Fuel prices; Open Skies treaty; Competition; European carriers like Air France-KLM

Contents : 
The US Airline Industry
New International Airlines Starting Operations in the US
Market Share of Low Cost Carriers in the US Domestic Routes
Delta and Northwest Merger: Issues and Challenge

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