This study was conducted to explore mergers and acquisitions in the aviation industry and the corresponding impact on supply chains. The problem statement: Merger and Acquisitions are a common theme in the airline industry. However, due to a lack of proper planning and integration of the supply chain process during the negotiation stage, supply chains involving the two companies are negatively affected. It is therefore important to find ways through which supply chain processes are integrated to ensure a smooth transition period after the merger or acquisition. The objective of the study: To determine the impact of mergers and acquisitions on supply chains in the aviation industry. The study follows a qualitative nature with an analysis of literature and a case study of a merger. The results indicate that there is a challenge in the supply chain after the consolidation of two companies. The study recommends that Continuous supply chain integration monitoring is required to enable timely feedback, allowing corrective measures to be performed and the process to be modified to follow the intended route. This will allow the managers at these companies to evaluate all their processes, and in turn, they will be able to determine areas that need improvement.
Abstract
This study was conducted to explore mergers and acquisitions in the aviation industry and the corresponding impact on supply chains. The problem statement: Merger and Acquisitions are a common theme in the airline industry. However, due to a lack of proper planning and integration of the supply chain process during the negotiation stage, supply chains involving the two companies are negatively affected. It is therefore important to find ways through which supply chain processes are integrated to ensure a smooth transition period after the merger or acquisition. The objective of the study: To determine the impact of mergers and acquisitions on supply chains in the aviation industry. The study follows a qualitative nature with an analysis of literature and a case study of a merger. The results indicate that there is a challenge in the supply chain after the consolidation of two companies. The study recommends that Continuous supply chain integration monitoring is required to enable timely feedback, allowing corrective measures to be performed and the process to be modified to follow the intended route. This will allow the managers at these companies to evaluate all their processes, and in turn, they will be able to determine areas that need improvement.
Exploring Mergers and Acquisitions in the Airline Industry and the Corresponding Impact on Supply Chains
Problem Statement
Merger and Acquisitions are a common theme in the airline industry. However, due to a lack of proper planning and integration of the supply chain process during the negotiation stage, supply chains involving the two companies are negatively affected. It is therefore important to find ways through which supply chain processes are integrated to ensure a smooth transition period after the merger or acquisition.
Mergers and Acquisitions generally involve numbers, and supply chain processes can sometimes be left unattended. There are two companies that are involved, with each coming with its own set of aircraft. Deciding on where the supplies come from during the initial stages after the merger presents a significant challenge, and this might affect the airline operations.
Intent
This paper aims to explore the nature of mergers and acquisitions in the airline industry. The description of what happens during the takeover will also be described. After reviewing a takeover case of an airline, the paper will also give recommendations on the best way to handle mergers and acquisitions to prevent supply chain pitfalls during and after the negotiation process.
Research Question
To determine the impact of mergers and acquisitions on supply chains in the aviation industry.
Hypothesis
1. Mergers and acquisitions in the airline industry have the potential to cause supply problems due to the upscale of operations and a lack of proper planning during the transaction negotiations.
Literature Themes
Merger and acquisition (M&A) is a business technique that allows a company to expand into new markets by combining two firms. Companies use the M&A strategy to get access to markets that were previously unavailable to them and to grow or enhance their firm (Rozen-Bakher, 2018). The goal of a competitive strategy is to establish a unique and valued position through a variety of actions. Strategic positioning entails choosing actions that are distinct from those of rivals. Mergers and acquisitions may be part of a company's competitive strategy to expand and explore new markets.
In recent years, several nations, including China, India, the United States, and France, have seen numerous mergers and acquisitions in the aviation business. According to Veldhuis (2005), excess capacity and low returns in the airline sector have led to mergers. Mergers in the aviation sector might result in fewer rivals and economies of scale when it comes to using resources and routes. However, not all M&A transactions have the desired outcomes. One of the main causes for poor post-merger results is a lack of understanding of supply chain functions throughout the negotiating process as well as in the final agreement.
This article aims to comprehend the significance of supply chain integration in M&A transactions in the aviation sector. It also tries to discover the best method for generating maximum operational synergies, such as cost reductions and economies of scale. Because India has seen a lot of M&A activity in recent years, especially in the aviation industry, an attempt has been made to collect evidence from Indian firms and compare it to the results of the literature.
Despite the fact that there is a clear relationship between efficient supply chain integration and deal success, the first and most often noticed difficulty in every M&A transaction is the absence of engagement of supply chain leadership in the deal process. This presents a potential risk in properly maintaining the aircraft after the merger and acquisition. The degree of attention given to operational concerns in pre-merger talks is low, and this has been highlighted as one of the most critical causes for M&A failure (Saraan & Srai, 2008). The risks of a merger failing are highest throughout the integration process. Operational concerns in general, and logistic issues in particular, have received little consideration in M&A transactions.
Data Collection and Analysis Plan:
This study will explore the literature surrounding the merger and acquisition deal that resulted in the creation of the National Aviation Company of India Limited (NACIL). The data collocated will involve past statements made about the merger and acquisition deal on how it turned out after the deal was done.
The analysis of the data will be qualitative, with the results of the merger being of utmost importance. The paper will seek to analyze how the supply process was affected after the merging of Air India and Indian Airlines. The outcome of the merger will be crucial to determine the supply chain issues that arise after the merging of two airline companies.
There will also be a review of the literature on the subject relating to mergers and acquisitions in the aviation industry. This method is considered scientific (Yasuda, 2018) and can there be used to make conclusions about a subject matter. The information in this literature will be important to inform on the causes of failure in merger deals in the aviation sector.
Results
The merger between Air India and Indian Airlines resulted in the formation of the National Aviation Company of India Limited (NACIL). The new business was awarded authorization to begin commercial operations. Even after the merger, the new company's operating brand name (NACIL) remained AI, and Maharaja remained the new company's mascot. The merger was projected to result in one of the world's largest airlines in terms of fleet size. The two airlines had a combined fleet of 122 planes and 34,000 workers, including 1,315 pilots.
Despite the fact that the formal merger was finalized, the two firms continued to operate independently, and the merger was purely symbolic (Agrawal et al., 2020). There was one website for the amalgamated business for over four years after the merger, however, there were distinct links for the former companies Air India and Indian Airlines on the homepage. Separately, tickets were also purchased. The integration of personnel remained incomplete as well. Those who worked for AI continued to focus only on the activities of their previous employer. Air India's pilots continued to fly only international routes, while Indian Airlines' pilots continued to fly only local routes.
The goal of merging Air India and Indian Airlines was to gain scalability, consolidate operations, eliminate duplication in ground handling, ticketing, maintenance, and storage, and create a smooth customer experience, among other things (Agrawal et al., 2020). However, there was little integration of resources such as airplanes and servicing facilities. The major cause for this was the two businesses' distinct aircraft fleets. AI, an international long-distance carrier, has a fleet of mostly big long-haul Boeing planes. IA, a short-distance domestic carrier, on the other hand, had only medium-capacity airbuses in its fleet.
Conclusions
The case of the NACIL merger highlighted supply chain operating challenges unique to the aviation sector in M&A transactions. According to the research, a successful M&A necessitates the early identification and appropriate capture of synergies. If planned ahead of time, supply chain integration can assist speed up the synergy generating process. There have been several occasions where mergers have failed because supply chain synergies were overlooked early on. Effective implementation necessitates strong cooperation across supply chain management and the business function, especially if large synergy savings necessitate some business sacrifice.
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- Quote paper
- Rhoda Frank (Author), 2023, Exploring Mergers and Acquisitions in the Airline Industry and the Corresponding Impact on Aircraft Maintenance Organizations, Munich, GRIN Verlag, https://www.grin.com/document/1363790
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