Report question about AMR-US Airways - Assignment Example

Fuel volatility is bad for the airlines because it reduces airline revenues, trust fund revenues, and access of passengers to the national aviation system. The domestic passenger traffic, reduces by 9% overall. Some airlines in the US decrease of 25%. These decreases declined the revenue of airports, prompting the airports to cut their operating costs, and hold the capital improvement projects. Price fluctuation also led to airports to reduce their airline capacity causing some of the passengers to lose access to the services of commercial air.

This is due to increased fares in the passenger market. Smaller airports with fewer flight options, has the largest percentage decrease in their nonstop destinations as well as their reduction in capacity. Therefore, when the price of fuel fluctuates, Trust Fund revenues will fall, thereby contributing to a decrease in the funds non-committed balance (Lehman, 67). The Cost per ASM is computed by calculating the operating cost by the available Seat Miles that an online provides each year, this will vary with capacity.

A quick analysis of the ASM from the company shows that the overall capacity has increased since. This explains the reducing Cost of ASM. On the other hand, the operating expenses have increased sharply since. Therefore, CASM for the 3month ending 2013/06/30 The Revenue Seat Miles is the distance an airplane flies times the passenger’s seat available for the passengers (Ones, 76). RSM is normally referred as the available seat miles. Therefore, the operating Cost per Mile is calculated as The difference between the two numbers is calculated as 926 The US Airways: The total operating cost in the 2nd quarter was recorded in $3.

4m, this was a one percent increase compared to the previous year. The operating Cost per available seat mile was recorded are 12.88 cents. This was down 2 % on a 4.2% rise in the airlines ASM. When special items like profit and fuel sharing are excluded, the airline’s CASM becomes 8.21 cents. The 8.21 cents is a 0.4% decrease in CASM compared to the previous year. The merger will benefit the firms because it would generate it would raise more than half a billion dollars to the consumers and firms as well.

Additionally, the merger will provide an effective competitor to some of the leading companies in the industry (Ones, 76). This will reduce competition by sidelining the market from creating competitive and new flight options for the passengers (Nutriment, 88). Consequently, the merger would result in cutting of services and raises the domestic fares. Also, the merger would be beneficial to the firm because it would result to a more competitive airline industry thereby giving the passengers more choices (Lehman, 67).

Also, the merger would bring about the most competitive development in the airline industry. It is in the same dimension that FTC allowed UA-CO merger. However, the FTC is discouraging AA-US merger because the merger would reduce the legacy carrier number from 4 to 3. This would increase the chances of coordinated professionalism among the airlines. This will lead to higher fees, fare, and diminished services. Therefore, blocking the merging of the two airlines will loosen the competition. This will prolong the cycle of the crisis to the passenger’s detriment, to the US airways, and also to the employees