Air­line Merger Wars

The bat­tle for the soul of an air­line.

Air & Space Smithsonian - - Front Page - BY JOHN SOTHAM

Be­fore the ink is dry, the fight­ing be­gins.

MY DAD BE­GAN HIS CA­REER as a Na­tional Air­lines ticket agent in New Or­leans in 1962. At the time, Na­tional was pro­moted as the “Air­line of the Stars,” with ads fea­tur­ing grin­ning Hol­ly­wood ac­tors, and my dad was proud to be part of it. Na­tional had a his­tory go­ing back to 1934, when it used a fleet of two Ryan mono­planes to move pas­sen­gers and mail around Florida. Even­tu­ally, Na­tional’s story ended like so many air­line sto­ries do to­day: It was bought by another air­line. In 1980, Na­tional was ac­quired by Pan Amer­i­can World Air­ways.

In 1982, my dad was trans­ferred to Pan Am’s flight con­trol fa­cil­ity at John F. Kennedy In­ter­na­tional Air­port on Long Is­land, New York. By then, the air­line in­dus­try was reel­ing from nu­mer­ous merg­ers, ac­qui­si­tions, and the ad­vent of low-cost star­tups like Peo­ple Ex­press. My dad con­sid­ered re­tir­ing. To air­line em­ploy­ees, it felt like a car­rier was al­ways a pen stroke away from an in­vestor’s liq­ui­da­tion or an auc­tion­eer’s gavel. Even the mighty Pan Am was bro­ken up and sold off to Amer­i­can, Delta, and other car­ri­ers just a few years later, in 1991.

I thought of Dad re­cently, one af­ter­noon at the Dal­las-fort Worth air­port as I boarded a US Air­ways flight to Char­lotte, North Carolina. Soon, this Air­bus would sport an Amer­i­can Air­lines logo when the merger be­tween the two com­pa­nies, an­nounced in early 2013, was com­plete. (The com­pa­nies were legally com­bined in De­cem­ber 2013, af­ter a brief De­part­ment of Jus­tice anti-trust suit was set­tled, but it will likely take un­til the end of 2015 for all op­er­a­tions to come un­der a sin­gle ban­ner.) The US Air­ways in­flight mag­a­zine of­fered the ex­pected “We’re be­com­ing a bet­ter air­line” spin. Doug Parker, Amer­i­can Air­lines’ chief ex­ec­u­tive, smiles in a photo a few pages in­side, and a page in the back fea­tures the com­bined fleet, show­ing many of the same air­craft mod­els in their re­spec­tive liv­er­ies, side by side.

As with other global in­dus­tries, the air­lines can sur­vive only if they re­spond to large eco­nomic forces, and past de­ci­sions to com­bine fleets and per­son­nel may have helped make it pos­si­ble for al­most any­body to travel al­most any­where to­day. But re­mem­ber­ing my dad’s ex­pe­ri­ence, I won­dered how merg­ers look from the in­side—that is, to the peo­ple who report to work ev­ery day as their em­ployer changes its iden­tity. In the case of Amer­i­can and US Air­ways, de­spite man­age­ment hopes for unity, the two car­ri­ers are still very dis­tinct en­ti­ties.

The ini­tial skir­mishes have al­ready taken place at the union ne­go­ti­at­ing ta­ble, where for pi­lots and flight at­ten­dants in par­tic­u­lar, noth­ing means more than the se­nior­ity list, which de­ter­mines base pay, type of equip­ment flown, and pre­ferred sched­ul­ing. And given the com­plex­ity of buy­ing another car­rier in to­day’s air­line in­dus­try, some­times you’re plan­ning a merger with at least one air­line that hasn’t fully com­pleted a previous merger. Just to make things more con­fus­ing, the name the air­line chooses to con­tinue op­er­at­ing un­der doesn’t in­di­cate who came out on top. Doug Parker was once the head of America West Air­lines; when America West ac­quired the bank­rupt US Air­ways in 2005, he be­came the chair­man of a new US Air­ways, which then ac­quired Amer­i­can Air­lines; each time the com­pany as­sumed the name of the more rec­og­nized brand.

A tan­gled web of union con­tracts re­sulted. “At some point, all the happy hand-hold­ing is go­ing to go away,” said a first of­fi­cer at Amer­i­can in early 2014, shortly af­ter the in­te­gra­tion be­gan. He and many other cur­rent air­line em­ploy­ees were will­ing to share their sto­ries, but un­will­ing to be iden­ti­fied for fear of reprisals from their car­ri­ers or unions. “We’re go­ing to spend months fight­ing each other,” the pi­lot said. “We’re go­ing to have a sit­u­a­tion [sim­i­lar to] where US Air­ways is with America West Air­lines. There’s still no se­nior­ity list.” In March, the US Air­ways pi­lot union filed suit against Amer­i­can in U.S. District Court over how their se­nior­ity lists would be merged; as of De­cem­ber, the lists re­main sep­a­rate. “We’re re­ally not at the clash-of-cul­tures stage yet,” he adds. “We’re op­er­at­ing com­pletely sep­a­rate air­lines.”

The ten­sion can spill over into the cock­pit. Although the pi­lot says the in­ci­dents are iso­lated, he re­calls hear­ing about a US Air­ways cap­tain who re­fused to al­low an Amer­i­can pi­lot to ride in the jump seat—a pro­fes­sional cour­tesy ex­tended thou­sands

of times a day across vir­tu­ally all air­lines all over the world. The snub was widely con­demned among the flight crews of both air­lines, and the US Air­ways union re­minded their mem­ber­ship that fel­low air­crew should be treated with re­spect.

Even when a merger ap­pears com­plete to the pub­lic, such as the 2010 mar­riage be­tween United and Con­ti­nen­tal Air­lines, the in­ner work­ings of­ten take years of lit­i­ga­tion and ne­go­ti­a­tion to set­tle. United is in the midst of a four-year plan to in­te­grate the two car­ri­ers; it has man­aged to ex­e­cute a la­bor agree­ment for the com­bined flight crews, but op­er­a­tion is another story. Fly United to­day and you’ll be ser­viced by a crew from United, or a former Con­ti­nen­tal crew in United uni­forms, but never a mix of the two com­pa­nies on a sin­gle jour­ney.

“They’re kind of do­ing things in steps,” says a flight at­ten­dant hired by Con­ti­nen­tal in 1983 who now works for United af­ter the merger. Un­der the cur­rent union ne­go­ti­a­tions, legacy United and Con­ti­nen­tal air­lin­ers can only be flown by their legacy crew, but these air­planes are moved around to meet a route’s de­mand. “Man­age­ment can switch planes sev­eral times on any given route,” says the at­ten­dant. “This flex­i­bil­ity is great for op­er­a­tions but causes havoc in the flight at­ten­dant ranks.” Un­til the con­tract ne­go­ti­a­tions, which have been go­ing on for four years, are fin­ished, crews can­not pre­dict what cities and routes they’ll be on from month to month. And United’s de­ci­sion

to not in­vest as heav­ily in its do­mes­tic fleet is ev­i­dent to pas­sen­gers fa­mil­iar with the old Con­ti­nen­tal, he says. “Con­ti­nen­tal was a launch cus­tomer for the Boe­ing 787,” says the at­ten­dant. “We have en­ter­tain­ment in the seat backs. You get on one of [United’s] 757s and it’s like step­ping back to the 1970s—they still have the big, clunky TVS in the over­head you bonk your head on.” But what feels like chaos at first can even­tu­ally set­tle down. A year ago, says the at­ten­dant, he felt “that we’ve dumbed down to ‘big United,’ we have man­age­ment mak­ing de­ci­sions and mis­takes we made 30 years ago.” Now, he says, “These were two very big battleships com­ing to­gether...i may have felt that we were in free-fall a year ago, but I feel like we’ve turned the cor­ner and may ac­tu­ally pull this thing out af­ter all.”

Nev­er­the­less, in an in­dus­try where merg­ers have been fu­eled by bank­ruptcy af­ter bank­ruptcy, the dy­namic that plays out as crews be­gin to work to­gether—in the cock­pit, on the ramp, or in the aisles—is one of the con­queror and the van­quished. “I’ve never met a group with so many ar­ro­gant cap­tains,” says a former North­west Air­lines pi­lot who now flies for Delta, af­ter the merger in 2008. He re­called shar­ing the cock­pit with a Delta cap­tain dur­ing one ap­proach for land­ing. The in­di­cated air­speed was 205 knots, but the max­i­mum speed for the Boe­ing 757’s flap set­ting was 195 knots. The North­west pi­lot ad­justed the flaps. “Did I get a ‘Thank you’? No, I got a ‘How dare you touch the flap lever with­out my per­mis­sion,’ ” he says. “I’ve flown with some nice [Delta] guys and gals. But in my opin­ion, their man­age­ment is very rank-struc­tured: cap­tain, first of­fi­cer, flight at­ten­dant.” At North­west, he says, flight and cabin crews worked to­gether more as a team, not as a “Do as I say” hi­er­ar­chy.

There was prob­a­bly no big­ger clash of cul­tures than the one re­sult­ing when Pan Am pur­chased Na­tional. Pan Am was es­sen­tially the orig­i­na­tor of air­liner cul­ture, but Na­tional had a col­or­ful his­tory of its own. The smaller, mostly do­mes­tic car­rier had re­cently be­come known for its cheeky and sug­ges­tive 1970s “Fly Me” cam­paign, which fea­tured at­trac­tive fe­male flight at­ten­dants, come-hither looks, and air­craft adorned with women’s names em­bel­lished with red hearts.

Na­tional em­ploy­ees, my dad liked to say, were just Reg­u­lar Joes—an ex­treme con­trast to the Pan Am folks. He re­counted that while he was wait­ing to board a Mi­ami-bound Pan Am flight at JFK, the board­ing pass prin­ter at the gate failed. A grow­ing scrum of pas­sen­gers ap­proached the counter while the pro­ce­dures-driven Pan Am agent strug­gled with the ma­chine. Fi­nally a Na­tional gate agent stepped for­ward, took a stack of blank passes, told ev­ery­one to get in a line, and started hand­ing them out. As my dad told it, the Na­tional agent quelled the re­bel­lion with a sim­ple “Get on the damn air­plane.” Cri­sis solved.

In the cock­pit es­pe­cially, Na­tional’s blue-col­lar ways didn’t mesh well with Pan Am’s white-gloved ethos. “You couldn’t have had two more dif­fer­ent cul­tures,” says Steve Peterson, who was fly­ing Boe­ing 727s for Na­tional dur­ing the merger. “At Na­tional, we were al­lowed to make our own de­ci­sions. At Pan Am, there was a rule for ev­ery­thing…. The chief pi­lot and peo­ple in charge at Na­tional had a pretty good feel for what the cap­tains could do and trusted them.”

Pan Am crews, Peterson says, car­ried them­selves with an air in­fused with the legacy of founder Juan Trippe, im­mor­tal­ized in a fa­mous photo: dap­per suit, pipe clenched in his teeth, sur­vey­ing his of­fice globe for new re­gions of the world where he could send one of his Clip­pers. The Pan Am mys­tique could still be seen as late as 2002 in the movie Catch Me if You Can, in which Leonardo Di­caprio im­per­son­ates a Pan Am pi­lot af­ter wit­ness­ing some of them in their tai­lored 1960s fin­ery be­ing pestered for au­to­graphs by young boys who were just as starstruck as if they were chas­ing as­tro­nauts. “The Pan Am guys felt they were bet­ter than any other pi­lots,” Peterson says. “Maybe it was all the gold stripes and white hats.”

Peterson re­calls how Na­tional and Pan Am crews dealt with me­chan­i­cal is­sues from the cock­pit. “When a Na­tional cap­tain and crew made de­ci­sions, the chief pi­lot usu­ally backed them up. With pro­fes­sional engi­neers who held [air­frame-and-pow­er­plant] li­censes, it was like hav­ing a me­chanic on board,” he says. “At Pan Am, when we had a prob­lem, we were en­cour­aged to call it into the com­pany and let them han­dle it. There was more mi­cro-man­ag­ing of crews by the com­pany.”

Peterson wit­nessed, with some ad­mit­ted schaden­freude, the plight of Pan Am pi­lots when the air­line was sold off af­ter declar­ing bank­ruptcy in 1991. Delta bought many of Pan Am’s routes and as­sets and ab­sorbed many of its em­ploy­ees. “I would

sit and lis­ten to all these Pan Am guys com­plain,” Peterson says. “And se­cretly I’d think, ‘Fi­nally you guys are see­ing what it’s like to be on the bot­tom.’ That’s why there’s al­ways so much an­i­mos­ity, be­cause there’s al­ways a win­ner and al­ways a loser. When we went to Delta, we were all losers.”

For em­ploy­ees of the most sto­ried car­ri­ers, the end came hard. To those who wore the uni­form, Trans World Air­lines, a com­pany that in its long his­tory had been led by le­gendary fig­ures like Howard Hughes, World War I ace Ed­die Rick­en­backer, and Charles Lind­bergh, was much more than a cor­po­rate brand. “TWA, when it was in its peak through the ’60s, ’70s, and ’80s, was a more per­son­al­ized air­line,” says Jerry Warkans, who be­gain his ca­reer as an in­flight cus­tomer ser­vice man­ager for TWA and fin­ished it at Los An­ge­les In­ter­na­tional as man­ager of fu­el­ing for Amer­i­can, af­ter it ac­quired the three-times bankrupted TWA in 2001. “[TWA] was big, but it took care of its peo­ple.”

But Warkans ad­mits that TWA em­ploy­ees cer­tainly had a chance to play the con­queror in the game of merg­ers. He re­mem­bers when it ac­quired the re­gional car­rier Ozark in 1986: “A lot of Ozark peo­ple rose in the ranks, but some of them—one of them was my best friend—were not treated well by TWA peo­ple.”

In 1961, United merged with Cap­i­tal Air­lines, a strug­gling car­rier that traced its lin­eage to Clif­ford A. Ball, who op­er­ated an early air­mail route in 1926. By 1955, Cap­i­tal was op­er­at­ing Vick­ers Vis­count tur­bo­props and Lock­heed Con­stel­la­tions, as well as DC-3S and -4s. To­ward the end, Cap­i­tal started op­er­at­ing a few Boe­ing 720s (a ver­sion of the 727 de­vel­oped to land on short run­ways) on con­tract with United, but oth­er­wise, it was a small, pro­pel­ler-driven air­line. If you were a Cap­i­tal pi­lot, how would you be in­cor­po­rated into United, if you could be at all?

“I was on the 1965 ne­go­ti­at­ing com­mit­tee that merged the two se­nior­ity lists,” says former Cap­i­tal pi­lot Clyde Luther. “[United] worked to pro­tect their peo­ple and keep all the Cap­i­tal peo­ple off the [jet-pow­ered] DC-8.” Dur­ing a two-year freeze, he says, Cap­i­tal pi­lots could only fly United’s pro­pel­ler-driven DC-6S and -7s. As the air­line’s two se­nior­ity lists be­gan to merge, Cap­i­tal pi­lots be­gan to fly United’s jets too, in­clud­ing the DC-8 and 737.

“They were seat-of-the-pants pi­lots,” says Bud Cochran, a 30-year vet­eran of United who had amassed nearly 18,000 hours in the Boe­ing 737 by the time he re­tired in 1998. In 1968, when Cochran was hired, he shared the cock­pit with former Cap­i­tal pi­lots, who he de­scribes as “good to ex­cel­lent pi­lots who flew the air­plane first and wor­ried about the pro­ce­dures sec­ond.”

Cochran re­calls the dif­fer­ences when de­part­ing from air­ports where noise abate­ment was man­dated.

The Cap­i­tal pi­lots would take off and then “zoom climb” to al­ti­tude. “They were not fly­ing the pro­ce­dure, but in my opin­ion, it was as good or bet­ter. They were just dif­fer­ent guys in how they han­dled the air­plane. If you were a copi­lot and didn’t do what they wanted, they wouldn’t have much to do with you…. I re­ally felt they han­dled the air­plane bet­ter than the United pi­lots did.”

Oc­ca­sion­ally an air­line merger can bring out the best prac­tices from each player. At South­west Air­lines’ Dal­las head­quar­ters, where you’ll see em­ploy­ees play­ing full-court bas­ket­ball in the park­ing lot, another merger (or “in­te­gra­tion,” as South­west se­nior ex­ec­u­tives pre­fer to call it) is un­der way. Air­tran Air­ways is still tech­ni­cally op­er­ated as a sep­a­rate car­rier, although the two have shared a sin­gle Fed­eral Aviation Ad­min­is­tra­tion op­er­at­ing cer­tifi­cate since March 2012. Up un­til the end of 2014, when South­west’s brand­ing fi­nally sub­sumed the Air­tran name and liv­ery, book­ing a South­west flight would get you ei­ther air­line, or, if your trip re­quired a con­nec­tion, per­haps a com­bi­na­tion of the two.

Wear­ing a snappy sport coat, Greg Christo­pher is over­dressed by South­west stan­dards. One of six net­work di­rec­tors at South­west head­quar­ters, where he is lit by the dim glow of dozens of mon­i­tors, he over­sees op­er­a­tions for both South­west and Air­tran. In the cen­ter, the rul­ing ethos is that the two air­lines are op­er­at­ing as one. The flight at­ten­dants from each air­line may ser­vice the cabin dif­fer­ently, but dif­fer­ences can’t ex­tend into the de­ci­sions made in the cock­pit or by flight op­er­a­tions. “We don’t want South­west pulling out of Bal­ti­more be­cause of snow show­ers while we still have Air­tran op­er­at­ing,” says Christo­pher.

A par­tic­u­lar dif­fi­culty is man­ag­ing both Air­tran’s hy­brid point-to-point and hub-and-spoke model and South­west’s point-to-point route map, which it has held on to tena­ciously since the 1970s. “South­west is much more in­tense,” he says; the air­line op­er­ates about 3,400 flights a day with more than 600 air­craft, while Air­tran has about 700 flights and 130 air­craft. Ul­ti­mately, the two mod­els and the vastly dif­fer­ent scale of op­er­a­tions are just too dif­fi­cult to in­te­grate, so the com­pany will per­ma­nently keep op­er­a­tions sep­a­rate.

That Christo­pher is in charge of op­er­a­tions is no­table, be­cause he’s an Air­tran con­vert, not a South­west vet­eran. “South­west came in strong and as­sured us that we’d be treated well and that we’d have jobs,” he says. “Their peo­ple cul­ture re­ally shined through.” Only two Air­tran dis­patch­ers, Christo­pher says, chose to re­tire rather than con­vert to South­west.

In another cor­ner of the build­ing, Sonya La­core, South­west’s se­nior di­rec­tor of in­flight cus­tomer ser­vice, sits in an over-wing row of the crew trainer, a Boe­ing 737 fuse­lage sec­tion. The trainer is part of the “Air­port Ex­pe­ri­ence,” a fa­cil­ity that in­cludes check-in kiosks and gate coun­ters and is a class­room for all new South­west hires. Wear­ing a leop­ard-print dress, La­core has a soft, calm­ing de­liv­ery. Just the per­son you’d want to over­see your cabin fire, se­vere tur­bu­lence, or wa­ter evac­u­a­tion, all of which are sim­u­lated here via hy­draulic rams, smoke gen­er­a­tors, and in­flated rafts out­side the cabin win­dows. A new class en­ters, and soon a po­ten­tial flight at­ten­dant is strug­gling to close a sev­eral-hun­dred-pound gal­ley door with the re­as­sur­ing “ka-chunk” fa­mil­iar to any fre­quent flier. New can­di­dates are elim­i­nated if they can’t mas­ter the FAA re­quire­ments; for in­stance, some are sent home if they can’t de­liver emer­gency in­struc­tions in the sim­u­la­tor with enough au­thor­ity to take com­mand of the cabin.

There are two ver­sions of the flight at­ten­dant classes now: one for novice at­ten­dants to learn pro­ce­dure, and one for Air­tran Air­lines vet­er­ans to learn how to be an am­bas­sador of the South­west brand. Once she’s strapped in, the av­er­age flier may not no­tice a big dif­fer­ence in how she’s treated, but at the cor­po­rate level, cabin crew pro­ce­dures are a se­ri­ous busi­ness: In a busi­ness with ra­zor-thin mar­gins, su­pe­rior cus­tomer ser­vice can help an air­line com­pete for pas­sen­gers and is there­fore part of the re­lent­less drive for prof­itabil­ity.

La­core has great re­spect for Air­tran, which she views as very well run; it has an al­most mil­i­tary ethic, mir­rored in the ap­pear­ance of its flight at­ten­dants (fe­male flight at­ten­dants were re­quired to have their hair tightly bound up). Some Air­tran crews had a dif­fi­cult time ac­cept­ing that flight at­ten­dants could wear shorts and polo shirts, while oth­ers liked the new free­dom. Re­gard­less, La­core’s mis­sion is to take the best of Air­tran and fold it into the in­deli­ble South­west per­sona.

“No dis­re­spect to the past de­ci­sions of their lead­ers, but it just wasn’t who they were,” La­core says. “Our cus­tomers have come to know us, and they’re look­ing for some fun, some laugh­ter and some jokes and some songs. There were so many Air­tran flight at­ten­dants that had that in them, but some of it had been sup­pressed. And so they were able to fi­nally ex­press them­selves, which I thought was so cool to see them get to do that. They al­most didn’t trust us at first: ‘I can re­ally sing and I won’t get in trou­ble?’ ”

Another step was get­ting Air­tran crews to em­brace South­west’s egal­i­tar­ian ethic, ex­em­pli­fied by such fea­tures as open seat­ing on its flights. And, La­core says, “they use the cart on their air­craft, and we use the tray.” La­core be­lieves the tray pre­vents the usual queue of lava­tory-bound pas­sen­gers from be­ing blocked by the bev­er­age cart, and al­lows flight at­ten­dants to be mo­bile, smil­ing, and fo­cused on other pas­sen­ger needs as they ply the aisle.

“Our short hauls were for­eign to them too, so they weren’t used to get­ting up as soon as our flight at­ten­dants do. At 10,000 feet,” La­core snaps her fin­gers, “they’re up.” Early in its his­tory, most South­west flights landed in des­ti­na­tions scarcely an hour away, but as the car­rier grew, so did its routes. La­core says their flight at­ten­dants are ab­sorb­ing in­for­ma­tion from Air­tran’s crews about work­ing longer flights, such as han­dling on­board cus­toms pa­per­work as South­west pre­pares to fly to Mex­ico—its first in­ter­na­tional routes.

While South­west con­tin­ues to in­te­grate the best of both worlds with Air­tran, Doug Parker, over at Amer­i­can, says he’ll be adding a Twa-painted air­craft to the Amer­i­can fleet and will re­tain at least one US Air­ways-liv­er­ied jet as a morale booster for em­ploy­ees who wore that logo on their uni­forms. But the cul­ture clashes will con­tinue as long as one air­line is gob­bled up by another, likely to go un­no­ticed by the ever-in­creas­ing num­ber of pas­sen­gers, doz­ing in coach and for­ever hun­gry for a cheap seat.

With ev­ery air­line merger, a car­rier and its cul­ture dis­ap­pear. Clock­wise from left: Cap­i­tal Air­lines merged with United in 1960; Pan Am gob­bled up other air­lines be­fore it was dis­man­tled in 1991; TWA bought Ozark Air­lines in 1986; Na­tional Air­lines,...

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