Return to Previous Page

Why Does a Merger Fail? A Case Study on Air India and Indian Airlines Merger

CASE STUDY, STRATEGIC MANAGEMENT
ET Cases, 10 Pages

Case Preview

Why Does a Merger Fail? A Case Study on Air India and Indian Airlines Merger

 

“Indian Airlines merger has caused Air India’s downfall”, remarked Ashwani Lohani, the Chairman and Managing Director of Air India, on account of the poor performance of Air India.1 Since long, the financial performance of the leading public sector aviation company of India had been unsatisfactory. Air India has also been facing numerous other problems like pilot issues, managerial issues and operational issues. The merger created discontent and frustration among the employees and the customers lost their trust in the company. What were the reasons behind the Air India crisis? Did Air India actually benefit from the merger? Was the merger of Air India with Indian Airlines the reason behind all the crisis at Air India? Was the merger a success or failure and was it able to achieve all the anticipated synergies?

In 2007, both Air India and Indian Airlines, two public sector aviation companies of India, merged with each other to form one of the largest airline under the company, National Aviation Company of India Limited (NACIL), which was later renamed as Air India Limited. After the merger, the merged company has been working as Air India and it is the largest public sector aviation company of India. The merger of these two aviation companies was equally important for the Indian and the global aviation industry along with Indian public and private aviation sectors. To achieve some common synergies along with individual synergies was the principal motive behind the Air India and Indian Airlines merger.........................


 1 Mihir Mishra, “Indian Airlines merger has caused Air India’s downfall: Ashwini Lohani”, http://economictimes.indiatimes.com/opinion/interviews/indian-airlines-merger-has-caused-air-indias downfall-ashwani-lohani/articleshow/52998986.cms, July 1st 2016 (accessed date: October 31st 2016)

Teaching Note Preview

Why Does a Merger Fail? A Case Study on Air India and Indian Airlines Merger

 

Synopsis

The two national carriers of India (Air India and Indian Airlines) merged in 2007, to fulfil certain goals but, failed to achieve the desired result. The merged company faced numerous financial and operational problems after the completion of the merger. Before their fusion, both the companies aimed to become one of the biggest airlines in the Indian as well as international skies. This wishful thinking suffered financial instability, human resources issues along with operational inefficiencies as soon as the merger completed. Several factors (financial/non-financial, company related, industry related) played negatively for the defined deal and changed the result of the entire merger game. This case study describes the motives behind the deal and the procedure of the deal and also explores the achieved synergies along with the anticipated synergies. It can be used to analyse the success and failure factors of M&A. Besides the above, this case study can be used for discussing whether the transaction between Air India and Indian Airlines was a failure or success?

Prerequisite Conceptual Understanding (PCU)/Before the Classroom Discussion

Before studying and analysing the case, the students/participants should have a prior knowledge regarding M&A, motives behind M&A, trends of M&A in different sectors and industries. Sound knowledge on the aviation industry will make the learning even more interesting. The students/participants or case readers can visit several websites to gather information on Air India and Indian Airlines. News articles regarding the deal can provide significant insights for the better analysis of the case. The students/participants can also be asked to go through the annual reports of Air India to analyse the year-wise financial performance of the pre and post-merger scenario of the company.

Case Positioning and Setting

This case study can be used in the BBA, MBA and Executive MBA program in “Corporate Restructuring Course” or Merger and Acquisition Course” – To get a basic idea regarding the concept and motives of M&A, factors affecting M&A and problems facing by companies at the time of M&A. This case study will be also helpful in improving the analytical skills of the students.

Assignment Questions

I. What were the important reasons that lead to the merger of Air India and Indian Airlines?
II. Determine the company related, industry related, financial and non-financial factors those had their impact on the merger of Air India and Indian Airlines?

...........................

Preamble to the Case Study Analysis and Suggested Orchestration

This case study provides an opportunity to understand the reasons or motives behind M&A deals along with the problems faced by companies after the deal. The factors affecting the transaction and the financial ratios to measure the performance of the companies can be learnt from this case study. Students can get ideas on the industry specific (Aviation Industry) transactions from this case study. This case study analysis can be carried out as mentioned in Exhibit (TN)-I...........

$4.57
Rs 0
Product code: STG-1-0051, STG-1-0051A

Abstract

Inorganic growth in terms of Mergers & Acquisitions (M&A) has been achieving remarkable popularity among the business organizations across the world. The pros of M&A transactions have been a boon for corporate bodies, however, the cons of these transactions are unavoidable. Various research papers and economic surveys represent the evidence regarding the failure of M&A transactions. After M&A transactions, many companies face managerial issues, cultural issues and financial issues in the post-M&A period. This case study is based on a prominent Indian merger in the aviation industry which provides an idea on various aspects of M&A and reflects a number of merger-related issues in the real corporate environment. In the Indian Aviation industry, Air India and Indian Airlines were two famous aviation companies, which went for a merger deal in 2007. The merger has been a topic of discussion among financial analysts and business experts from the date of its completion. According to several corporate professionals, it is a failed merger and a few are of the opinion that, it is a corporate affair between two unsuited parties. Was the merger actually a failure? What were the reasons/motives behind the merger and the reasons of failure? What were the anticipated synergies and the actual synergies achieved by both the organizations in this merger?



Pedagogical Objectives

  • To understand the motives and reasons of the merger deal between Air India and Indian Airlines
  • To compare the anticipated and achieved synergies of the merger between Air India and Indian Airlines
  • To determine the reasons behind the problems faced by both the airlines after the merger

Case Positioning and Setting
This case study can be used in the BBA, MBA and Executive MBA programs in “Corporate Restructuring Course” or “Merger and Acquisition Course” – To get a basic idea regarding the concept and motives of M&A, factors affecting M&A and problems usually faced by companies at the time of M&A. This case study will be also helpful in improving the analytical skills of the participants.



This Case Pack Includes:
- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
$4.57
Rs 0

Related products




Request for an Inspection Copy

(Strictly for Review Purpose, Not to be Used for Classroom Discussion/Trainings)