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Transcription of this question: 4.Mergers in the airline industryRecently, British Airways merged with Iberia, and Air France merged with KLM. Both mergersresulted in some significant benefits.Ryanair plans a €560 million takeover of the Irish airline, Aer Lingus, which has failed to delivershareholder dividends. One shareholder, the Irish government, owns 25 % of the shares ofAer Lingus.Ryanairs chief executive officer (CEO) said that the proposed takeover could:create revenue and a positive return for the Irish government by selling its sharescreate a strong Irish airline capable of competing with major European airlines.This form of external growth is also occurring in the United States (US). American Airlines andUS Airways will merge, forming the nation’s biggest airline, to be called American.Airline analysts argue that mergers are necessary to reduce financial uncertainty and restorestability to a business that lost about $60 billion in 10 years. Large airlines with big networkscan invest in new airplanes, new routes and better facilities, and provide passengers with moretravel options. Mergers are likely to increase operational and financial efficiencies and createeconomies of scale. Airline analysts, favouring airline mergers, emphasize that each mergermust be approved by appropriate national and intemational regulatory agencies to ensure that thecompetitive nature of the industry is maintained.Other analysts, however, argue that:large airlines make it difficult for smaller rivals to compete, and in the long run reducecompetition. This situation may lead to higher fares and a poorer service.being larger may not make airlines globally competitive. Some national governments restrictoperation of foreign airlines within their countries, which allows a local airline monopolf to exist.strategic decisions are difficult to implement as companies grow in size.larger is not always better.(a)(b)(c)(d)Describe one difference between a merger and a takeover.Define the term economies of scale.With reference to the airline industry, explain two differences between external growthand internal growth.Examine the Irish government’s decision to own 25% of the shares of Aer Lingus.With reference to one internal stakeholder and one external stakeholder, discuss thestatement that “larger is not always better” from the perspective of the airline industry.[2][2][9]

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