Question

Trans Globe Airlines has recently looked into a merger with Royal Blue Airlines, a financially troubled rival. The firms believe the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations. This proposed merger is an example of a:

Answer 1

Answer: This proposed merger is an example of a: horizontal merger

Explanation:

Horizontal merger means the merger that takes place with businesses in the same industry. There are various benefits of horizontal merger. In this case Royal Blue airlines suffers from financial problem through merger the balance sheet of Trans Globe airlines can be combined .

Also horizontal merger reduces the competition in the business. The market share will also increase for Trans globe airline as it will take the customers of Royal Blue airlines. Other benefits are economies of scale, market power and revenue based synergies.