Airline mergers have become a common phenomenon in the airline industry with international and local alliances permeating the industry. Such mergers are aimed at improving the efficiency and effectiveness of different airlines to provide travel services at affordable rates, as well as to remain profitable and competitive. The proponents and supporters of airline mergers point out the need to cut on operation costs as the main reason for merging. This is in lieu of the recent economic downturn that saw some of the well-established businesses go under. Some airlines, such as Aloha Airlines, went down with the financial crisis as a result of several factors including increased cost of fuel and high operating costs. Moreover, increased competition from a sister company called “Go!” also contributed to the inability of Aloha Airline to operate profitably amid stiffening conditions in the airline industry.
According to Boyd Group International (2012, p. 3), the airline industry is one of the most sensitive businesses that require careful thinking and strategic planning for an airline to flourish. The reason why Aloha Airlines went into liquidation is that it became vulnerable and susceptible to the industry to the issues of fare prices, fuel cost, safety regulations, and even economic changes. Managers of airlines failed to have incisive thinking capacity to enable the company survive in this murky and volatile business. The current airline industry suffers and continues to bear the effects of economic downturn that started in 2007 with the global financial crisis. An important factor in the airline industry is the sensitiveness of the industry to economic changes in the world. This is because of the inherent dependence that the airline industry has on different economic sectors. This, therefore, means that a slight change in any of the sectors that the industry depends on is likely to produce a great negative impact on the profitability and operations of an airline. Coupled with increased competition in the industry, economic downturn has changed the way airlines operate and interact with their customers and their competitors. The need to remain profitable has seen airlines increase their fares, despite the dwindling number of passengers on their roots. Without viable measures to cushion itself against negative forces in the airline industry, the management of Aloha Airlines decided to liquidate the company upon the bankruptcy judge decision that the court could not interfere with business decisions (Cento, p. 12).
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