A Comparative Study of Mergers and Acquisitions Within the Eu Aviation Sector: a Case Study of British Airways and Iberia.

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A Comparative Study of Mergers and Acquisitions within the EU Aviation Sector: A Case study of British Airways and Iberia.

Key words: Mergers and Acquisitions, Aviation Sector, EU, Network Carriers, Strategies. Aims of Research:

The Aim of this research is to address the following issues:

1) What are the main motives for engaging in Merger and Acquisition activity for Aviation Market? Did they reach their goals?

2) What are the consequences of Airlines Company’s merger and acquisition? How did this activity affect the companies?’

Section 1: Background:
Mergers and Acquisitions (M&A) in aviation markets are quiet a hot topic in the industry, most recently as a result of increasing cost pressures and market share. Many argue that M&A is the perfect tool to survive in the rapidly changing world of globalization, as it allows growth, to gain access to new markets, to cut costs and to leverage risk. The European Commission, for example, argues that creating a full “Open Aviation Area” might generate up to 80,000 new jobs. The successful mergers of the recent past such as Lufthansa/Swiss, and the just agreed merger of BA and Iberia is the beginning of a new wave of mergers in the aviation sector. However, many others point to the pitfalls that are often associated with M&A deals, particularly in aviation. The aviation industry is a unique sector in the economy. This industry is also an unstable and unpredictable business (Airlines Merger and Acquisition, 2011). As stated by Dunning (1988) as well as Krugman (1987) international merger and acquisition, provides access to novel market in terms of sales volume and profit sharing (Datta and Puia. 1995). Merger also helps the acquiring companies to overcome the existing competition and certain investment fences (Gregoriou and Renneboog 2007).Companies can exploit wider range of resources and wider range of business opportunities. (Datta and Puia. 1995) There is sufficient need to recognize merger and acquisition points for aviation sector and the underlying aspects and information with regards to the process of merger, acquisition that links to financial performance of the newly created company.

Section 2: Research Questions / Hypothesis

Proposed research will try to investigate the following key research questions:

1. Was the merger of BA and Iberia serving its objective? 2. Does the concept of mergers actually increases the company’s financial position and therefore increase shareholders wealth? Section 3: Data Collection

For my research, I would have to conduct a thorough case study on the proposed companies. The information will be collected from multiple sources, online and printed publications, such as business journals, research papers, news articles and books for the purpose of outlining pre-merger motives of the companies Yin R. (2009).

Three interviews will be conducted with 2 mergers and acquisition advisors and 1 Chief Financial Associate who was involved in a takeover. The financial part of the data will come by deeply understanding and calculation of the respected company’s financial report and market data, once before and after the mergers.

The interview will be a focused interview (Merton, Fiske, & Kendall, 1990). I have worked under these experts and they are willing to give me more insight into the matter.

The research will be around four months project starting around 6th May 2012 from Literature review about the proposed topic to Final Report 2nd of September. The primary location of the research will be in Leicester. But for the interviews I have to travel to London to the interviewee office. I have plans to conduct one interview in 1 week (interview, note, and initial analysis).

Section 4: Methodology

To answer my research questions, I will use both qualitative and quantitative approaches.

The first part of the research question will mostly looked at and answered using a qualitative...
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