Airline mergers case study Essay Example | Topics and Well Written Essays - 1500 words

Airline mergers case study - Essay Example (Holtz and Grimme, 2009, p. 13) An ‘Open Skies’ agreement was signed between USA and European in 2007 that enabled the merged firms to ‘change their ownership structure’ and to get maximum voting rights from Dutch Government authorities. Indeed, the Air France and KLM then became subsidiaries of newly formed KLM – Air France. This was quite helpful in building shareholders’ confidence over top management of new company. (Holtz and Grimme, 2009, p. 14) The governments were paying special attention to develop environmental security laws and regulations to grapple with increasingly large menace of global warming. The demand of air travel was constantly growing since 2002 because of phenomenal economic growth and increase in real incomes in both developed West and emerging nations. This in turn created more opportunities for airlines that later resulted in higher monetary gains, however, the competition among firms increased substantially because of new entrants joined the arena. Indeed, the conditions were quite favorable because of skyrocketing demand for cargo services besides normal visitors. The merger would have easily increased business efficiency, market share and consumer reach. (Friesen, 2005) The increase in employment opportunities and business scope improved the standard of living across the world. Consumers, therefore, were inclined to use air travel services in their leisure. Similarly, business personnel were also required travel services to reach their destinations abroad for negotiation with partners, dealers and parties. Hence, propensity to spend for air travel had increased. (Katarzyna, 2004) The special attention was paid to develop modernised aircrafts with greater seat capacity, range and fuel-efficiency to minimise the threat of carbon emission and pollution. Indeed, the new aircrafts were produced to reduce consumption of fossil fuels. The bargaining power of customers was medium due to the fact the