Mystified by mergers
What is it that I just don’t seem to understand about airline mergers? From my point of view and from all of my experience over the past decades there has never been an airline merger that seems to have gone well. Yet, here we are in the midst of frenzied merger mania in the airline industry.
I believe that on a macroeconomic level, mergers may actually allow smaller airlines entrée into the systems as merged airlines reduce capacity. In a way, a merger doesn’t always result in less competition, but more, as smaller operators find new opportunities to expand. Then again, wouldn’t the result be the same if mismanaged, weak airlines were allowed to simply go out of business?
The history of airline mergers seems to show that for the customers, pilots, flight attendants, mechanics, caterers, IT executives and about every other employee of the merging airlines, life can become hell.
Allow me count the airline mergers that were rousing successes. Wow! I don’t even need any fingers. Is there one?
Not US Airways merging under duress with America West.
Not TWA merging with American Airlines.
Not Reno Air merging with American Airlines
Not Piedmont merging with US Airways.
Not the Delta-Western merger.
Not the Northwest-Republic combination.
If any readers know of successful mergers please add them to the comment section below.
It seems that when financiers and corporate executives begin wooing each other, the news is seductive for the media and the financial markets, but the results are not for the airline workers or airline customers.
I still haven’t figures out why, when jet fuel is a record levels, mergers are a good idea. I can’t figure out why, when no major airlines are in bankruptcy, this is a good time to start with mergers. It seems that the leverage of making changes and renegotiating contracts under bankruptcy protection has been abandoned.
The daunting integration of complex computer systems, reservation systems, aircraft maintenance operations, union rules from pilots, flight attendants, mechanics and others, not to mention blending seniority lists and the like will, if history is to be believed, cause huge disruptions that will alienate customers and employees for years.
I would love to hear from someone out there, why a merger is good for Delta and Northwest or for United and Delta or for Continental and United. I’m mystified.
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2 Responses to “Mystified by mergers”
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I can think of one successful merger. Southwest Airlines purchased Morris Air in the mid-1990s. It gave Southwest a significant presence at the Salt Lake City hub which effectively broke down the Delta monopoly (compare prices at SLC and CVG to see the difference).
I can’t think of any others, but the Southwest-Morris merger was a good example of how things “can” work out well. There were some hiccups in merging, but in general, it resulted in more service and choices for the Salt Lake City folks, because it allowed the Morris customers to connect throughout the Southwest network, and there was very little overlap between the two route systems. Unlike today’s mergers, lowering operational costs wasn’t a major stated goal of the combination.
There are very few such opportunities available today. Most of the smaller carriers are already subsidiaries (in whole or in part) of one of the larger ones. Five years ago, it might have made sense to merge some combination of Southwest, Airtran, JetBlue, Frontier, or Vanguard. With Vanguard’s demise, however, and the expansion of the rest, there doesn’t seem to be any easy way to combine two of those airlines to expand opportunities, especially since the last three all still use the hub model (which would be hard to integrate into the Southwest point-to-point system).