Business Information Systems Assignment: Airline Company Merger

Part A: Firstly read the passage below (Rainer et al. 2013, p. 70 -71), and answer question 1 which follows the passage of writing. Read the other articles provided below and answer questions 2 to 4, then complete part B.

In 2011, United Airlines and Continental Airlines merged to form the World's largest airline. When buying Continental, United promised investors $1.2 billion in new revenue and cost Savings.

Unfortunately, merging airlines is extremely difficult, largely because of the enormous number of processes that can be different between two airlines. Three major challenges that arose after the United/Continental merger were (1) integrating both airlines' flight information systems, (2) integrating both airlines' passenger information Systems, and (3) reconciling both airlines speed up slowdown algorithms (an algorithm is a mathematical formula).

Flight information Systems. Integrating United and Continental's flight information systems was a major strategic challenge. One Worry was that data would become corrupted during the integration of two systems, resulting in the loss of vital flight information such as destinations, arrival times, flight numbers, or plane locations.

In August 2010, the integration team decided that United's existing flight information system, Unimatic, would be better able to handle the size of the merged airline's fleet than Continental's system. With that decision, a second team, composed of computer technicians and operations center managers, created an exhaustive list of tests and contingency plans to ensure that the data could be combined without causing a catastrophe. The airlines emergency operations center was fully staffed for the data cutover.

For the final test in late October 2011, the team had an empty Continental 737 fly from Houston to El Paso and back, just to test that the operations center could successfully track the flight. The team asked the pilots to pretend to have a mechanical problem and return to the gate. That event successfully appeared on the system. Then the team asked the pilots to change the flight number and reroute the plane to Austin to see if that event appeared in the system. It did. Encouraged by the dress rehearsal, the team set a date for the data integration.

On November 2, 2010, just after midnight when there would be relatively few flights in the air, technicians took Unimatic offline. They began inserting Continental's data into Unimatic. For the next hour, as the technicians updated and tested the software, the operations center tracked the airline's flights manually. That manual process would become impossible when air traffic rose to daytime levels, and the airline had plans for a mass cancellation the next morning if the system did not operate as planned.

At 1:23 AM, Unimatic went back online. There were a few small glitches-planes that had crossed the international dateline during the outage had an extra 24 hours added to their arrival time-but otherwise everything had worked.

The Passenger information Systems. At the time of the merger, the passenger information system was divided between both airlines' databases. The integration team had to integrate not only the two databases, but also both airlines Web sites and loyalty programs. The team decided to adopt Continental's passenger services system, called Shares.

Shares had several advantages over United's old passenger information system, Apollo. Shares was more flexible and easier to customize (for instance, it was capable of asking travellers whether they would like to purchase an upgrade or extra legroom). On the flipside, Shares was less intuitive to use than Apollo, and United veterans struggled to learn it. All the dry runs proceeded smoothly, and just after New Year's Day in 2011, United agents handled all of the Continental flights at Los Angeles International Airport without a problem.

Speedup-Slowdown Algorithms. One critical issue for airlines is communicating to pilots when they should speed up, slow down, and take a different route. Both airlines used a different algorithm to determine when a plane should go faster to make up for a late departure and when (to the eternal disappointment of its passengers) it should not go faster. Flying faster burns more fuel, and fuel is expensive. But, being late is also expensive. Customers who miss connections have to be rebooked and sometimes put up in hotels, flight crews have to be paid for the extra time, and ground crews sit idle when planes are late.

The speedup-slowdown algorithm analyses all these factors (and more) and decides when the cost of being late outweighs the cost of speed. United and Continental's algorithms were different and did not always agree. The integration team spent many hours developing a new algorithm that combined the best features of each airline's original algorithm.

Solving these three integration problems (and there were many other problems) was vital in order for the merger to clear its biggest regulatory hurdle: getting a single operating certificate from the Federal Aviation Administration. By the time the certificate was awarded on November 30, 2011, more than 500 employees had spent 2 years working on the integration. Along the way, they reduced the 440 instructions manuals that governed everything taking place before, during, and after a flight down to 260.

Sources: Compiled from D. Bennett, "Marriage at 30,000 Feet" Forbes, February 6-12, 2012; G. Karp, "United Continental Merger Still to be Sealed." Star Tribune, December 28, 2011; H. Martin, "Working Out 2,000 Details of a Merger" Los Angeles Times, December 3, 2011; B. Mutzabaugh, "Merger Milestone: United, Continental Now Single Airline to FAA." USA Today, November 30, 2011; "United, Continental Merge Frequent Flyer Programs." Washington Post, October 16, 2011; S. Carey and J. Nicas, "United Feeling Merger Pains." Wall Street Journal, September 27, 2011; I. Schneider, "Merged United-Continental Has Windows 7 to Consider." Information Week, May 4, 2010; www.united.com, accessed February 13, 2012.

The list of online articles shown below are also related to the merger of United Airlines and Continental Airlines. Links (URLs) to these articles have been provided on the portal. Read the articles on and answer the following questions. Each question will require a short paragraph answer and should be in your own words. Please use Harvard Referencing to support your answers and demonstrate where you obtained the information.

Question 1: Briefly discuss the three major challenges arose after the merger, i.e. the challenge, possible related issues and the solution that was used to solve the problem.

Access the following article -

http://www.nytimes.com/2010/05/03/business/03merger.html (title: United and Continental Said to Agree to Merge) and then answer question 2

Question 2: How much money did the new merged airlines expect to save per year? To which of Porter's generic strategies does this relate?

Access the following articles -

http://www.wsj.com/articles/united-flights-grounded-due-to-computer-issue-1436361911 and http://marketrealist.com/2014/06/important-details-united-continental-merger/ then answer

Question 3: What problems has the merged airline had recently? Is there any positive news?

Question 4: See page 13 of the marketrealist article shown above. Briefly discuss United Continental's must-know targets for future efficiency gains.

Part B: Recall that you watched a video on Porter's competitive forces and the airline industry was mentioned. Watch the video again at

https://www.youtube.com/watch?v=mYF2_FBCvXw

Use the information in the video and articles you have read to discuss Porter's competitive forces and the generic strategies for competitive advantage. Relate your answers to United Continental airlines, i.e. apply the forces and strategies for combatting the forces to the airline merger.

References for Introductory Passage in Part A

Rainer, RK, Princes, B & Watson, H 2013, Management information systems: Moving business forward, 2013 2nd ed. Australia: John Wiley & Sons Ltd, p 70-71.