USA TODAY International Edition
3 lessons for American and US Airways on merger
Now that the Justice Department has settled its lawsuit against the American Airlines- US Airways merger, there’s tremendous work to do to create the world’s largest airline, operating more than 6,500 daily flights. That’s easier to screw up than to get right, and lessons from past airline mergers can help.
Things the new American will need to do to succeed can be summed up simply: Respect your customers, and don’t make shortsighted decisions at their expense. Three specifics:
Adopt the larger airline’s technology infrastructure. Executives of the smaller airline — US Airways — will be in charge. In other mergers, that situation has caused trouble.
Back in 2007, I flew US Airways after it was essentially taken over by the smaller America West. Interestingly, the America West CEO then was Doug Parker, now CEO of US Airways and soon to lead American. Parker decided to use America West’s reservation network instead of the larger US Airways system, resulting in chaos. Even though customers were advised to check in online to avoid long airport lines, Web checkin didn’t work. Neither did check- in kiosks. It was a disaster.
Choosing the smaller airline’s computer system, familiar to Parker and his management team, might have seemed easier, but it hurt fliers and the airline’s bottom line.
Something similar happened in March 2012 when Continental management took control after merging with the larger United. Again, the executive chose to adopt his smaller Continental system. Flights couldn’t get out. Data were missing. Telephone wait times were hours long. Customers couldn’t even call United to buy a ticket if they wanted to.
No doubt, keeping the larger airline’s system would also have created problems. There is no instant way of merging the systems and cultures of two distinctly different companies. But adopting the systems that work best for the most passengers would have reduced the disruption.
Don’t dismantle American’s premium product. The smaller US Airways operates a good on- time airline. The larger American offers a more premium product. On time matters most, but customers also need to be treated with dignity and respect. They spend every week on planes, get upgrades and make buying decisions based on changes to the quality of the product.
Hopefully, that’s a lesson that Parker learned as head of US Airways in 2008 when his company tried to charge for water in coach.
American’s strategy throughout its bankruptcy reorganization that preceded this merger has been to become a premium carrier. It has a bigger route network and many more corporate contracts for which seats and meals matter. Abandoning that strategy in favor of US Airways’ barebones approach will send customers to more appealing competitors.
Value your customers, and be honest with them. Jeff Smisek, who was the CEO of Continental when it took control of the larger United, made a cameo in his new airline’s safety video and told passengers he’d make some changes they would like.
Wrong. Those changes included taking away upgrades from millionmile fliers, reducing bonus miles for frequent fliers and increasing ticket change fees.
Creating the world’s largest airline brings with it a great responsibility. By providing a better product, at a continually better price, the new American will grow its size and profits. But if its sees customers as the enemy, customers will fly with someone else.
Gary Leff writes travel blog ViewFromTheWing.com and co- founded frequent- flier community Milepoint. com.