Tuesday, 15 November 2011

UA and CO merge moves ahead.

In a recent speech, Jeff Smisek, CEO of United Continental Holdings, likened merging two large airlines to a total house remodeling. 


 "We are not doing painting and spackling here," he told a group of business executives in Chicago. Like a large construction project, the integration of United and Continental airlines is having its share of drama: meshing disparate cultures; the issue of new union representation contracts running behind schedule; some disgruntled pilots; customer confusion; and a long to-do list that includes minute details such as the proper verbiage when warning flight attendants to prepare for takeoff.


 Executives at United Continental maintain that crucial operational issues have been addressed and that the merger is proceeding without major glitches. "From my perspective, things are on track," says Jim Compton, United Continental's chief revenue officer. "Merging two airlines is a long process and complicated. We have a lot of work ahead of us." United and Continental announced their $3 billion merger in May 2010, creating the world's largest airline to be branded "United." They said they would generate up to $1.2 billion from cost savings and new revenue from their combined flight networks. The combined airlines would generate annual revenue of about $29 billion (based on 2009 financial results), they said. 


Shareholders approved the deal in September 2010. For now, the two carriers are flying under their own banners, and the company doesn't expect to finish merging the two reservation systems until the end of March. But some early integration tasks, such as painting planes and replacing signs, are proceeding quickly. Other crucial customer service issues — aligning frequent-flier programs, recoding kiosk software, agreeing on a reservation system standard — have made progress, too, Compton says. United Continental also has begun to rejigger the combined fleets by shifting some planes to better matching routes. For example, a United Boeing 777 plane, with both first- and business-class cabins, has replaced the business-class-only 757 jet used by Continental from Newark to Brussels, considered a premium market. 


 Mark Ozenick, an aviation consultant at SSA & Co., says dealing with mechanical and hardware issues is easier than combining and transforming the culture. "Where mergers fail is when they don't humanize the process and are not integrating the culture," he says. "Continental has a reputation for being very customer-centric. United not so much. At least that's the perception in the marketplace."


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