A spinoffs study applied to the airline industry
Name
865471766-MIT.pdf
Description
Full printable version
Size
4.78 MB
Format
Adobe PDF
Checksum (MD5)
3201aa704b4f3e7edcad88f29ba73526
Author(s)
Kutscher, Erika
Advisor(s)
Richard de Neufville.
Date Issued
2012
Publisher
Massachusetts Institute of Technology
Abstract
Airlines have been recently debated the management of some of their non-core divisions, such as the Frequent Flyer Program (FFP).A spinoff is a form of corporate contraction that many companies have recently chosen. Through a spinoff, both the parent company and the divested subsidiary can each focus on their own activity, which translates into a better performance of both entities. This thesis studies the circumstances in which a spinoff is a good strategy to pursue, along with some important issues that must be considered when reaching agreements. Spinoffs are basically a "downsizing" of the parent firm; therefore, the smaller firm must be economically more viable by itself than as a part of its parent company. The motivation for analyzing this particular topic comes from a question of current interest: Under what circumstances is it advantageous for an airline to spin off its Frequent Flyer Program, or other divisions that are not related with the airline's operation? In this thesis, an extensive literature review introduces the reader to the different forms of corporate contraction and their performance under different circumstances. Three cases related to the airline industry follow: the spinoffs of TripAdvisor from the web agency Expedia, of Air Canada's FFP Aeroplan, and of American Airline's distribution system Sabre. These three cases illustrate some of the key issues that must be carefully considered when spinning off a subsidiary. The thesis concludes that spinoffs are a smart strategy when the focus of the spun off division is different from that of the parent company. However, to safeguard future business relationships, the two entities must negotiate detailed agreements that are robust enough to perform successfully in all foreseeable circumstances.
Description
Thesis (S.M. in Engineering and Management)--Massachusetts Institute of Technology, Engineering Systems Division, 2012.
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 73-74).
Subjects
Engineering Systems Division.
MIT Department
Massachusetts Institute of Technology. Engineering Systems Division
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