In an effort to complete your proposal for the Senior Management Team, consider the following as you develop a plan of action for the company: Use the Five Stages of Organization Development Determine the diagnostic tools Select a Systems Approach to manage the change Outline a plan to evaluate the effectiveness of the change processAPA style with single space 1.0size 11- 12
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Mid-Term ExamHURD 741 Organizational Development
Case Study: Merger of US Airways and American Airlines
In February 2013, US Airways and American Airlines (AA) announced plans to merge, a union that would
create the worlds largest airline. Because this was the fourth major U.S. airline merger in recent years and
because the merger would take place in the context of bankruptcy protection sought by American Airlines in
2012, the parties anticipated intense scrutiny of the mergers competitive effects by the U.S. Department of
Justice (DOJ) and thus retained FTI Consulting subsidiary Compass Lexecon to perform the economic
analyses required to address the DOJs likely concerns. The DOJ was expected to focus on whether the
deal would decrease competition in the commercial airline industry enough to permit airlines to increase
prices in the various markets served by the merging parties. The extent to which restrictions on operations
and/or pricing designed to mitigate any anticipated competitive effects were required as conditions for
With regard to Compass Lexecons work on the merger, Bruce Wark, who led AAs legal and regulatory
efforts during the merger process, indicated that “We chose Compass Lexecon to evaluate and quantify the
consumer benefits arising from our merger. Their economists have a deep understanding of the airline
industry, and they have the reputation and knowhow to convince both regulators and judges. Their work
was instrumental both in defending against the claims filed by the DOJ and in finding a resolution with the
DOJ that allowed us to consummate our merger.”
Similarly, Howard Kass, who led US Airways legal and regulatory efforts during the merger process,
indicated that “Compass Lexecon was a valued member of the U.S. merger team. Having worked
successfully with Compass Lexecon on several other projects in front of regulators, we knew that Compass
Lexecon would bring a level of professionalism, expertise and candor that is unmatched by others.
Compass Lexecons devotion to its clients, knack for detail and commitment to finding solutions where
none seemingly exist are why we chose Compass Lexecon.”
FTI Consulting’s Role: Subsidiary Compass Lexecon
Teams of economists from Compass Lexecon had begun working on the engagement when US Airways
first expressed interest in acquiring American Airlines after it had filed for bankruptcy protection in 2012.
The teams analyzed massive amounts of data on the airlines traffic and pricing practices pertaining to
various nonstop and connecting routes in order to assess the potential overall competitive effects of a
combination, as well as effects on markets involving Reagan Washington National Airport in particular
where many anticipated that DOJ would require the airlines to surrender a significant number of takeoff and
landing slots as a condition for merger approval.
Based on these analyses, the Compass Lexecon team prepared whitepapers and held consultations with
DOJ staff that demonstrated that the transaction would have the effect of creating a larger network, which
would be able to operate more efficiently and effectively, thereby providing new and better options to all
airline consumers. By studying the outcomes of recent mergers, as well as pricing and traffic on routes with
Adapted from FTI Consulting
different numbers of competitors, the Compass Lexecon team also presented analyses demonstrating that
these benefits would swamp any potential competitive harm as a result of the transaction.
Despite this evidence, the DOJ surprised the carriers by filing suit to block the merger in August 2013,
claiming, among other things, that elimination of US Airways Advantage Fares Program, once the merger
was consummated, would increase airfares for consumers.
Outcome: A pre-trial settlement allowed the deal to proceed
In response to the lawsuit, the Compass Lexecon team shifted its focus to converting its prior work into
expert reports and presentations that demonstrated that the transaction would create significant consumer
benefits with minimal competitive harm, including heightened focus on analyzing and rebutting the DOJs
concern about Advantage pricing. In November 2013, soon after Compass Lexecon filed its evidence
and just weeks before the trial was scheduled to begin a settlement was reached that required limited
(and anticipated) concessions, including the divestiture of 104 slots at Reagan Washington National Airport
and 34 slots at LaGuardia Airport.
The settlement, which was upheld by the courts in April 2014, kept the parties merger plan intact and will
allow $1 billion in estimated annual synergies arising from the transaction to be realized.
Your department is responsible for developing, implementing, and evaluating all
Change Management interventions for the new American Airlines Group Inc. (NASDAQ: AAL).
You are specifically in charge of creating the change management plan for:
Human Capital Strategy
In an effort to complete your proposal for the Senior Management Team, consider the following as you
develop a plan of action for the company:
Use the Five Stages of Organization Development
Determine the diagnostic tools
Select a Systems Approach to manage the change
Outline a plan to evaluate the effectiveness of the change process
Adapted from FTI Consulting
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