An Analysis Of The Influence On Profitability Through Merging

With the development of economy and the increasingly fierce market competition, moreand more enterprises choose the way of merge with other companies. The merging of airtransport industry takes a definite proportion，and a multitude of related industry can be droveby the development of air transport industry, for this reason, a research on the merging of airtransport industry has a important significant. Besides, the analysis on profitability is a keypoint of financial analysis, therefore, this essay will take air transport industry as a example toanalyze the effect on profitability of merging. In the process of researching, this essay choosethe case of the merging of China Eastern Airlines (CEA) and Shanghai Airlines (SA), it’s aimportant and typical event in our country. First, CEA is one of the three key aviation groupsin China and takes a important role in the air transport industry; second, in the year of2008, ahuge loss has happened to CEA with a number of14.046billion which shocked the vocation,what should CEA do became a question that attracts all investors; third, as same as CEA, SAwas also in the low ebb during those years, both of the companies in the merging are weak,what can be happen after the combination is a puzzle.By a brief analyze of cases of business merger that occurred all over the world, we canfind that most enterprises have a better business performance than before, merging can bringeconomies of scale and synergy. Hence in this text, we consider that business merger of CEAand SA can bring the dying back to life, furthermore, we will verify this view by data analysis.In the analytical investigation, this essay take the research method of other scholastic asexample, based on the financial data before and after the merging, the entry point is theanalysis of profitability, meanwhile, the essay also analyzed the operation capacity and theability to obtain cash, at the same time, a crosswise comparison among CEA, Air China andChina Southern Airlines was underway to judge the effect of the merging activity.The analysis result shows: first, the merger of CEA and SA brings economies of scale,the scale of company and the coverage of airlines was enlarged, market occupancy and theamount of traffic was increased; second, the synergy emerged after the merger and thefinancial situation takes a turn for the better, profitability, operation capacity and the ability toobtain cash had improved to varying degrees, the increasing of profitability was obvious, so in the early period, the merger of CEA and SA achieved a good effect; third, comparing with thesame industry, the competitiveness of CEA advanced a lot, a majority of index were betterthan Air China and China Southern Airlines, which explained that merging brought goodbenefit for CEA again; forth, the competition in the transportation industry become more andmore fierce, to air transport industry, the running of high speed railway system is a strike.Therefore, the business performance of most airlines were declined, but take CEA itself asexample, the state of operation was far better than2009. Based on these views, the essay drawa conclusion that the effect of the merger between CEA and SA is good, and the mergerpromoted the development of CEA. On the whole, the result of this essay have certaintheoretical significance and reference value.The innovation point of this essay: by consulting the documents on merging of otherscholar, we can find that most of them conducted empirical study by analyzing a great deal ofdata. In this essay, the researching method is case study which aimed at one single company,the conclusion will be fit to the company.