Complexity Squared: Merging United and Continental

There was a very interesting article in a recent edition of Bloomberg Businessweek on the integration of United and Continental.  Makes me glad I’m not in the airline industry (although the deal is a “must follow” for anyone interested in acquisition integration).
 
 
The article doesn’t offer a ton of technical or integration know-how but several interesting points emerge:
 

Top business leaders are beginning to understand that integrating acquisitions can take enormous amounts of time.  Jeff Smisek, President and CEO of the new United is quoted as saying the integration will take “several years.”  How many name brand CEOs have that vision on the complexities and subtleties of an integration process?  Bravo, Jeff.

I wonder is the CO/UA situation made even more difficult by two companies that are endeavoring to create a truly merged entity rather than the usual whale/Jonah strategy.  Does a merger of equals require more tact? (That would seem obvious.) More time? (To be done right, I would say, “yes.”)  Different angles or solutions?  (Now there’s an interesting question indeed.  Any thoughts out there?)

The author of the article makes a very salient point about culture but unfortunately buries it deep in the body of the article:

“Before the new United can feel like one entity to consumers, it has to feel like one entity to its employees.  Ultimately, that’s the most difficult part of a merger – combining cultures.”

Smisek himself reinforces that concern on the company’s website:

“The biggest challenge is making sure that we develop the right culture of the combined companies.”

For fun and profit, I offer a few of the issues that the two companies grappled with in their integration process (all serious but some more amusing than others):

  • Differing labor contracts (duh)
  • Differing premium service classes
  • Onboard coffee service (this was apparently a gigantic issues)
  • Inconsistent flight tracking software algorithms
  • Differing customer loyalty systems
  • Plane boarding procedures
  • Staff uniforms

“God is in the details,” said architect Ludwig Mies van der Rohe.

The final solution for the New United’s logo is almost too simple, too obvious. But it does imply the practical, uncomplicated (?) union of two companies … at least to the outside observer!

The other interesting element of the article was the highlighting of the 2005 merger between America West and US Airways as the airline merger nightmare of all time.  I am impressed that someone at CO or UA seems to have read the playbook from that deal and smartly done the opposite.

Historical note: the perhaps colossus of all merger screw-ups was also a transportation deal: the 1968 merger of the Pennsylvania and New York Central railroads.  Is there something about transportation deals that we should be looking at?

Question: What other industries are prone to this kind of high complexity in merging?  Is it the high technology component? The extraordinary requirement for exactitude and safety? The intense demands of highly stressed consumers?  Something else?  Experiences please ….

In a future posting we will take a look at United’s web site and how it is dealing with the integration process.  Stay tuned.

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