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Airline Oligopoly 2013

Once again, there is another airline merger on our hands. American Airlines filed for bankruptcy in November 2011 and proceeded to announce their $11 billion merger with US Airlines. Forbes Magazine says this merger will make this the world’s largest airline (passenger volume). The question on every travelers mind is: will this be good or bad for me?

American Airlines was paying its employee’s (pilots, flight attendants, ground crews, etc.) more than any of its competitors. This strategy was great to gain employees, but was ultimately not sustainable in the long run. Before confirming their merger with US Airlines, American Airlines was attempting to salvage their way through the storm. Although filing for bankruptcy sounds abysmal, bankruptcy allows for American Airlines to dispose of their current labor union contracts. Being able to dispose of these contracts meant that over 14,000 employees would lose their jobs and even more would receive pay cuts. Luckily, US Airlines CEO Doug Parker fought for those employees and contracted a merger.

Portland International Airport

Portland International Airport

Behaviorist, Dr. Jean Meeks-Koch, and professor at the University of Portland worries what will happen with the new airlines organizational culture. Organizational culture is the behavior and actions of employees and what these things mean. When mergers occur, everything becomes uncertain, including one’s job. Although there will be many job losses occurring in this merger, which fills many employees with the fear of uncertainty, US Airlines has decided to relocate to Dallas, TX (American Airline’s Headquarters) in order to save more jobs.

One of the biggest things Dr. Meeks-Koch discussed was what company is going to end up on top. Mergers are never 50/50 and in this particular case, US Airlines will come out on top. US Airlines CEO, Doug Parker, will become the CEO for the new airlines giving American Airlines CEO, Tom Horton, one year to help with transition. Horton’s involvement in the new airlines will still be existent; however, he does understand the need for a new pilot in this crashing plane.

Doug Parker rising as CEO for the new airline means that thousands of people will need to learn new policies. No one enjoys learning new policies, especially ones that you did not apply for. There are many employees at American Airlines who have been there for decades, and the idea of change is unsettling for them. This type of attitude will lead to a destruction of the new airlines if not dealt with immediately.

In our interview, you could sense Dr. Meeks-Koch’s frustration over the apparent waste of her tax dollars. She pays so much in tax dollars every year to regulate the oligopoly of airlines. But with this merger, we are now back to the four major airlines. She has read many articles about how this merger will be good for the people, but she softly laughs as she explains that no merger is good for anyone except the shareholders. Big mergers like this have this huge ripple effect. As soon as pilots or flight attendants begin to worry about their job security, they no longer focus on their customer service. When customer service is poor, clients don’t enjoy their travels and more than likely won’t choose to fly this new airline again. One of the most important things, Parker and Horton can do is make their employees feel safe and secure.

Dr. Meeks-Koch advice is to fly any other airline, at least for the first year. Allowing the new airline the time to settle and get back on their feet is what she plans to do in order to receive the best service from them in the future.


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