Issue:
Two years after United Airlines merged with Continental Airlines, the new United is still struggling with its operations, staff, and customers.
Overview:
The United-Continental merger of 2010 was supposed to create a powerhouse Airline, servicing 8 major hubs, 5,500 flights daily, and offering passengers close to 400 destination options. While all of this still might be true, the merger has been anything but smooth sailing for United. In addition to the financial burden ($60million charge in 3rd quarter for merger related expense), United's booking system has failed twice, and it has the worst on-time record of all the major airlines. There was hope that everything was supposed to be running smooth at this point, considering that Continental was among the top performing airlines.
There are also obviously merger related problems that the new airline is facing. They are still working on merging the two computer systems, and technologies which is going to be a hassle depending on how different the systems are. United now also has to deal with two different sets of employees, Continental was in good standing with their employees, whereas United wasn't. This also means that United has to renegotiate both sets of contracts for the employees to come up with one new one for the new merger. This is going to pose a problem, especially if the two separate companies treated their employees differently.
History says that there is hope for this new merger, both US Airways and Delta experienced growing pains the years following their mergers. Now both companies are doing well, so hopefully the United merger will follow their lead.
Manager implications:
Mergers are always difficult no matter what the industry. There is always going to be some lag time before the new firm can run smoothly and start seeing the benefits they had hoped for. This is of course assuming the merger can succeed, according to many studies the failure rate starts around 50%. United use the expertise from Continental, to get their on-time records up, and improve employee relations. They need to utilize the most important benefit from merging, and that is the sharing of information.
Mouawad, Jad "For United, Big Problems at Biggest Airline
" http://www.nytimes.com/2012/11/29/business/united-is-struggling-two-years-after-its-merger-with-continental.html?pagewanted=all 28 Nov 2012
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