Ma Case Lufthansa and Austrian Airlines free essay sample

Furthermore, the Federal Republic of Austria paid a EUR 500m restructuring aid for AUA: This amount will be received by Lufthansa to compensate for the negative shareholder value. All in all, this means for Lufthansa that it can acquire AUA at a relatively cheap price. After the merger and the restructuring, AUA will be making profits again and therefore contribute to Lufthansa earnings. Already in the past, Deutsche Lufthansa and Austrian Airlines have maintained a close and successful cooperation within the Star Alliance Group. This cooperation particularly concerned the neighborhood air traffic between Austria and Germany, a common usage of airport facilities and a common marketing strategy within the regime of the frequent flyer program â€Å"Miles and More†. As they have been working together very closely over the past years, they have a common understanding of the set of rules within the Star Alliance Group and furthermore they have already established and oriented their dayto-day business in an efficient logistical and communicative way. We will write a custom essay sample on Ma Case Lufthansa and Austrian Airlines or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page It is true, that there could be a risk of a cultural clash when integrating AUA in LH, but both companies seem to have a very similar cultural culture. First of all, both are operating in the same business area, the airline business. Furthermore, both do have a similar national culture as the employees are residents of neighboring states that share the same mother language. It is true, that both could have different working styles as AUA was a mainly public company with the Federal Republic of Austria as core shareholder and LH a private profit seeking one. With an integration of AUA in LH, there can be reached various synergies, not only for Lufthansa, also for Austrian. There would be higher sales potential and an improvement of procurement conditions. The economies of scale were estimated to be EUR 80m that are additional to the synergies of the already existing partnership of both companies. The synergies can be subdivided into: revenue synergies, cost of sales synergies and other cost synergies. International M A Briefing paper Ines Haitzinger By effecting the merger, management of AUA could be operated more efficiently. AUA, with the OIAG as a strong core shareholder, has always been focusing achieving more political goals (maximization of votes) instead of financial ones, as labor union representatives and politicians had a quite big influence on AUA’s managers. Poor strategic decisions were carried out, just as the oversized and unprofitable flight network. With Lufthansa and its profit seeking strategy and its management expertise, unnecessary costs can be cut down and redundant workforce be laid off, and the flight network could be adjusted to the actual demand. AUA’s company performance could be improved tremendously and the company would soon be in the position to generate profits again, which will consequently also contribute to Lufthansa’s earnings. Austrian Airlines will remain largely responsible for its financial performance and the quality of its products. The company will be managed as a profit center in Lufthansa Group. AUA will remain a broadly independent airline with its head office in Austria, its own brand, fleet and crew. Furthermore, Austrian air traffic infrastructure will also remain to a great extent, taking into consideration the needs of Vienna as a business location.