Still Untied: Revisiting United+Contintental

The news from United Continental Holdings Inc. (UAL) is not good. Amid the bad weather that hampered all US airlines and competitive issues affecting all US-Asia carriers, one unique difficulty emerges:

“parallel processes” left over from the 2010 merger.

Merger Verger Translation:

We still haven’t been able to realize the intended benefits of the merger, here, nearly four years later.United-Logo new (untied)

Are you getting that? It is hard to make mergers succeed. And United worked tirelessly at it, hired smart advisors and focused legions of people exclusively on the integration. It still didn’t pan out as planned.

GOD IS IN THE DETAILS, folks. And the main issue that continues to hamper the new United is technology. It cannot get the combined/updated/revised and reconfigured IT systems to run together glitch-free. And in an airline, where IT systems control absolutely everything from the first interface with the customer to ensuring that planes stay aloft or aground at exactly the right times, failing to get them right means failing to get the merger right. Everything else pales. At United, IT has been sucking the marrow from the Continental deal.

Look, make no mistake, the combined United and Continental should emerge one day as the kind of global powerhouse that the world’s largest airline should be. It’s just a question as to whether the present value of that achievement will be positive given the amount of time it is taking and the amount of investment and operating losses the company is paying in. Observation in hindsight, I get that, but it must be said.

Recommendation:

What are the takeaways from the United + Continental deal? The Merger Verger sees two:

  1. Know Thyself (in intimate detail). If you are in a business that relies on anything that is remotely complicated, you’d better understand exactly what makes it complicated and exactly how to slice those complications into manageable bites. Running a set of inter-connected complexities is a challenge; merging them is a challenge squared … or cubed, which leads to …
  2. Ability to run is not the same as ability to merge. If you learn nothing from other people’s acquisition troubles, learn this. DO NOT assume that because you can make one complex organism sing you will be able to combine two such organisms and make them function as one. That might seem like a reasonable extrapolation but – and you can trust The Verger here – that would be a bridge way too far.

bridge too far

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s