CH 15 Blog

http://seekingalpha.com/article/67819-delta-northwest-evaluating-company-performance-in-a-dysfunctional-industry

Summary: This blog is about the present financial state of a few American airlines. Over the past years the Air Transportation Association of America had lost an estimated value of 22 billion dollars, but although they suffered this huge loss, they still managed to gather $1,866 billion revenue, so they are not completely going downhill. Some of these reasons include the fact that the airlines have planes worth up to $100 million each, but are not easily liquidated. The second reason is that they depend heavily on skilled labor. Another reason would be that the airlines industries can't lure customers to pay for their tickets because they can't advertise well enough. Most people know that there is a slight chance of death when boarding a plane. It goes on talking about how some airlines want to merge their companies with others, which isn't a good idea according to this article.

Connection: This article relates to chapter 15 because it is talking about how a business is doing and it even shows this by presenting a table which reports the transaction costs and market cap(cost of the stocks of a company). By looking at this, we can evaluate how well the company is doing financially. They also changed the values into percentages which makes evaluating more simple and obvious. The table is comparing the transaction costs and market caps of 6 companies. In this case, Delta took the lead with a total M&A transaction costs of $10.5 billion.

Reflection: This article states that the merging of airlines companies is bad and I also agree. If the companies merged then the number of shareholders would double, therefore the share prices would not rise either. In this case DAL+NWA merged, but they turned out to be the lowest ranked of the 5 airlines. We know this because it was all due to the information and knowledge that was given to us by the table that accurately analyzed the transaction costs and market caps of the companies. Information on an analysis sheet with numbers is more believable than a sheet with only words on it.