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Delta/United Merger: Good Luck with That

You’ve no doubt read about the (possible) merger talks between United and Delta.  Yes, there are synergies in their route structures — it would create an airline giant with a massive global footprint.  But let’s get real.  Airline mergers have not failed because of route overlap.  They fail because of workforces (see: US Airways/America West); because of technology (see: US Airways/America West); because of fleet integration issues (they would have a laundry list of aircraft); and because the supposed synergies of a largescale integration never arrive. 

Is this merger impossible?  No.  Is this merger unlikely?  Yes.  Are the operational issues of merging these two groups together virtually insurmountable?  Absolutely.  US Airways and America West announced their merger 2 1/2 years ago, and it’s still an operational mess (see: website).  And those were small(ish) airlines compared to these two.  Just because a merged United would fly to Cape Town, Kiev, and Seoul does not make this a great idea.

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  1. I would submit that the US Air/America West merger tells us a lot about labor issues that arise during a merger, but not that much about operational issues. There certainly were some computer related problems in integrating rez systems, but the problems were fairly short-lived and probably avoidable with more staff and higher competence. I think their poor operational performance earlier this year had much more to do with “taking their eye off the ball” than merger integration. Moreover, the ops problems (for the moment at least) seem to be in the past tense, as the airline’s on time performance continuies to dramatically improve — at almost 90% this month last I looked (good news doesn’t make news).

    The labor issues are obviously more intractable, as the US Air situation certainly shows the continued ability of airline labor unions to be self-destructive.

    One potential way around some of these problems is to not actually merge, at least for awhile. Run the airlines semi-independently. Many businesses have different “brands,” and I see no reason why airlines couldn’t. The extra profits would largely be achieved through right-sizing the combined operation, and extra efficiencies in transferring passengers. I’d personally be in no rush to try to actually combine any of the large legacy carriers.

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