Recent talks about the possible merger between British Airways and Iberia opened heated discussions about the justification of bringing together two loss making airlines in search for lifeline during the 'system overhaul'. Looking back in time, hardly any merger in the past two decades was truly successful. This raises doubts that they may have a deadening effect on airline business and holding back progress. Among the factors contributing to poor operational and financial output is the fact that long and costly process of integration is hardly ever thoroughly assessed before merger decisions are made, causing many unpleasant and unnecessary surprises at a later stage. In addition, the root causes of problems are impossible to track through standard performance reports, exposing airlines to longer traumatic experiences, and increasing the risk of failure.
Among the earliest and most common signals of problematic mergers is an increase in volume and length of operational disruptions which usually spread over years rather than months. The majority of them are the result of painful integration processes including fleet and network planning, information systems, and dealing with difficult cultural issues. This is well illustrated through the merger between US Airways and America West formalised in September 2005.Their full integration started in 2006 and took three years to complete. In 2007, the merged US Airways was rated in various surveys as the worst-performing big airline in the US – it officially had the worst record for on-time flights, misplaced bags among the major airlines, and piled up the most customer complaints. The list of problems included things like combination of reservation systems that ended up in mess, distrust between the employees from two sides, and serious issues relating to merging pilots seniority lists, among many others. One employee representative claimed that the merger was an absolute disaster for employees and customers. In 2008, the merged airline was looking for a new merging partner (without success). In mid-2009, it was reported that US Airways was placed under credit watch due to several factors, including capital and revenue.
So, to merge or not to merge? This could be a survival question - in the short, as well as in the long term. There are opinions that unless the candidate airlines learn the lesson from the past experiences, the least efficient loss making airlines should just be left to fail, potentially allowing for healthier systems to evolve.
