Mergers and Acquisitions in the Aviation Industry

Mergers and Acquisitions in the airmanship IndustryBackgroundAviation labor is a symbol of all-encompassing national power and an extremely weighty part of the national defense. It is too a signifi heapt guarantee for national security and an essential condense for the development of economic and society. In the entire atmosphere pains, civil atmosphere is made up of all types of gentle wind activities using aircraft except war machine applications, which includes defense, police and customs, and the civil aviation includes commercial aviation and general aviation. In novel years, the rapid development of civil aviation plays an increasingly measurable role in the aviation industriousness.In terms of globalization, the aviation manufacturing is mainly concentrated in the get together States, Europe, Canada, Australia and some other certain regions. A eagle-eyed with the rapid development of the global economy, the enthusiasm for developing aviation industry of many ne w industrialized countries has also been greatly inspired. A number of high-end manufacturing, including the aviation industry, argon shifting from developed countries to developing countries, to go finished the global grocery demand, many developed countries and developing countries began the cooperation. The economic din and financial crisis of the current world has caused a great shock on aviation industry, although the condition is getting make betterd, it is still very difficult to look to what the future will be. As wizard of the leaders of the aviation industry all over the world, the trade of aviation industry in the fall in States has been greatly affected in recent years. The fallen price of tickets, come up price of oil, as well as anti-monopoly policy, all have negatively charged impacts on the civil aviation industry in America.Merger integrating is trend of the development of international aviation industry in recent years. There atomic number 18 many exam ples In Europe, Air France and KLM Royal Dutch Airlines were merged in 2003 Lufthansa purchased Swiss Air in 2005, and later purchased the Austrian Airlines British Airways and Iberia Airlines merged in 2010 . After a series of mergers and reorganizations, the commercialize is full of vitality and private-enterprise(a) power. In the United States in recent years, the operation of civil aviation industry has become much more difficult and many airline companies are seeking to break through this condition by mergers and acquisitions. In 2005, US Airways merged America westward Airlines Delta Air Lines purchased Northwest Airlines in 2008 two years later, the United Airlines and Continental Airlines were merged and turned into the United Continental Holdings incorporated in 2011, south-west Airlines purchased the AirTran and after two years, Ameri clear Airlines merged US Airways. After the mergers and reorganizations, these companies in operation(p) performance begins to rise ou t of recession, but whether the specific results really are optimistic? This dissertation will make analysis and judgment.Congress trim the control of the grocery store in 1978, which brought the US economy grocery store uncomparable interests. America has a mature aviation industry market, which has become an important factor of the growth of economy now. Even if in that location is a teensy change in the industry, it can bring a big square off on various aspects. In this tough competitive environment at home and abroad, the civil aviation industry attracts much more attention. assiduousness TendencyIn recent years, the aviation industry in the United States had generated a rophy of new companies and there have been a lot of bankruptcy and merger phenomena, which is bound to affect the emulation intention of the aviation industry. In this dissertation, the methods used to calculate the immersion of aviation industry are Herfindahl-Hirschman Index (HHI) and Concentration Ratio (CRn).The calculation method of industry dumbness index is the most common, and it is also an important indicator of measuring the market structure. It indicates the degree of assiduity of the industry by calculating the proportion of the germane(predicate) value (such as sales, value added, number of employees, primitive assets, etc.) of the first gear bouffantst n companies in the industry toward those of the entire industry. For example, CR4 refers to the relevant market share busy by the four largest enterprises and CR8 way of life the relevant market share engaged by the eight largest enterprises.If the CRn is greater, it indicating a higher(prenominal) degree of concentration of the industry and the more likely for competition in the market tend to be monopolistic on the contrary, the lower the concentration is, the more likely for competition in the market tend to be competitive.(MBAlib, 2012)The formula is CRn=. In this formula, Si means the market share of th e enterprise i, n means the total number of firms (for instance, the number is 4 or 8.) in the industry.However, the disadvantage of CRn is that this concentration ratio cannot indicate the total number of enterprises which are operating and competitive in this industry. For example, the market share of 2 CR4 with the same value of 75% in two different industries might not be the same, because there may be scarce a few companies in one industry and the other industry may have many companies. Therefore, in the dissertation, HHI will be used to measure the market concentration to improve the credibility of the data.HHI calculates the sum of the squares of market share of the largest 50 companies in this industry (if the number of companies is less than 50, it includes all enterprises). Obviously, the greater HHI is, the higher the degree of market concentration and the higher the degree of monopoly. The index can not only hypothe size of it the market share of large enterprises, but also can reflect the market structure besides large enterprises. Therefore, HHI is able to reflect the impact of large enterprises on the market more accurately.The formula is HHI=2. In this formula, Si means the market share of the enterprise i, n means the total number of firms in the industry. HHI changes between 1/n and 1, which indicates that the higher value is, the greater unevenness distribution of the size of a firm. As long as firms merge, the value of HHI will increase as long as the firms decompose, the value of HHI will be reduced.The advantage of HHI are it reflects large companies market share more sensitively, while reflects many small businesses market share very little, and it cannot be affected by the number of companies and the size distribution of the industry, which is better to measure the changes in the market concentration of the industry.(MBAlib, 2010)This gameboard illustrates the values of CR4, CR8 and HHI in ten years. According to the concentration r atio CR4 and CR8, it can be obviously found that the aviation industry was behaving as an oligopoly and was a highly concentrated industry, while in terms of HHI, the market concentration was moderate. All of the 3 values were keeping decreasing from 2001 to 2006 and appeared to hit throne in 2007, in which year the economy crisis took place. After that, the tendency of market concentration was improved and reached a new height in 2013. (Ahren J. 2011)In summary, the level of market concentration of aviation industry was decreasing first and then keeping increasing in the United States. Accordingly, the competition tendency also turned from competitive to monopolistic, which indicates the number of companies was reduced and the market shares of large firms have increased.ReferencesMBAlib (2010) Concentration RatioCRnonlineNew York. procurable from http//wiki.mbalib.com/wiki/%E8%B5%AB%E8%8A%AC%E8%BE%BE%E5%B0%94%E2%80%94%E8%B5%AB%E5%B8%8C%E6%9B%BC%E6%8C%87%E6%95%B0 Accessed 29 Janua ry 2015Ahren Johnston (2011) CONCENTRATION IN THE AIRLINE INDUSTRY raise OF ECONOMIES OF SCALE?onlineNew York, Journal of Transportation Management. Available from http//www.deltanualpha.org/pdfarticles/2011/Ahren%20Johnston.pdf Accessed 29 January 2015MBAlib (2012) Herfindahl-Hirschman Index onlineNew York. Available from http//wiki.mbalib.com/wiki/%E8%A1%8C%E4%B8%9A%E9%9B%86%E4%B8%AD%E7%8E%87 Accessed 29 January 2015