Business strategies can be of many natures including mergers and acquisition. Acquisitions assist in attaining total control of the market and cost of production which is the main objective of Delta Air Lines. The management decided to acquire the Trainer refinery located in Philadelphia. This would cost the company about $ 150 million as initial cost and $ 100 million to make an overhaul of the refinery thus increasing the fuel extracted. This cost would be incomparable to the benefit acquired, which would be reduced cost of the fuel prices spent by the company. The escalating cost of fuel has driven the company to make this decision as this investment would save it over $ 300 million annual expenses on fuel cost. This acquisition and the overhaul would take about a year after, which has faced several criticisms from economics on its profitability level (MOUAWAD). It’s among the major refineries in Philadelphia producing about 185,000 barrels daily. To succeed in this plan, it is required that Delta employs experts in the refinery industry who can manage and have sufficient experience such as J. Warmann.
Boeing is one of the largest airline companies globally whose actions and acquisitions have a direct or indirect effect on other companies. The latest investment of the company is to purchase the 175 Next Generation aircraft. This is a long term investment which would cost the company about $ 15.6 billion making it the largest in history. This would be done after the approval of the Ryanair shareholders, which is a major carrier of Boeing in Europe. The airplane which is referred to as Next Generation-737 has been rated as the largest single aisle plane owned globally.
Acquiring it will improve the value and respect of customers to Ryanair company, which is a strategy implemented to ensure customer increase is achieved. It will assist it acquire price leadership in the industry by marking the airfares and charges put by other companies. It is also believed that there will be a cost reduction in the fuel expenses charged on the company annually. An addition to this investment will include the acquisition of more than 170 new 737-800 jets, which will increase the passengers flown by the company to 100 million annually (The Wall Street Journal). Some of these jets are expected to replace the depreciated planes while the rest expands its operations thus evading reducing costs of fuel and additional job opportunities. This strategy will have an overall effect of increased revenue in the company and ensure it acquires the competitive advantage it desires in the market.
Mergers among airline companies are management strategy, which has been acquiring popularity especially among major airlines. This is done to ensure the merged companies acquire domination in the market thus becoming price leaders. This was an undergoing decision which saw the mergence among two of the major airlines in America. The American Airlines owner which is a subsidiary of AMR Corp has been conducting secret meetings with those of US Airlines Group Inc. in a bid to unite their operations (Carey & Spector). Finally the two companies have finalized these transactions leading to the formation of a strong company in the airline industry leading to improvement of the American airline industry. The management of this new airline will be conducted by the CEO of Us Airlines Doug Parker. This strategy will reduce the annual cost of running and fuel cost through economies of scale and attract higher customers.
Mouawad, J., (April 2012). Delta to Buy Refinery in Effort to Lower Jet-Fuel Costs. The Wall Street Journal. Retrieved on April 10, 2013 from http://online.wsj.com/article/SB10001424052702304050304577376354288927594.html
Carey, S., & Spector, M., (February 2013).AMR, US Airways Predict Clear Skies. The Wall Street Journal. Retrieved on April 10, 2013 from http://online.wsj.com/article/SB10001424127887323478004578303630011153910.html
The Wall Street Journal (march 2013). Ryanair Sets Deal to Buy 175 Boeing Jets. Retrieved on April 10, 2013 from http://online.wsj.com/article/SB10001424127887323415304578370593099487534.html