Let’s take a shot at United Airlines

Continental and United Airlines announced their merger in 2010 and here in Q1 of 2014, I think that their earnings are shameful.

That’s because they didn’t have any earnings in Q1.  Instead, they had $609 million in net losses.

It’s been 3 years since they were able to close on the merger and begin integration.  It’s been more than a year since they acknowledged that they had problems in their integration.  This picture isn’t getting better, it’s getting worse.

Jeff Smisek famously joked that by having Continental merge with United, he saved United from having to marry the ugly girl. The ugly girl was US Airways.

The ugly girl married American Airlines and reported a Q1 net income of $408 million.  With the ugly girl management (Doug Parker & Company) in charge and they’ve barely gone to work on AA operations.

Seems to me that marrying the ugly girl would have been the smart thing.

Everyone looked at US Airways and sneered.  Delta, Continental and even American Airlines.  But the ugly girl kept earning money.  Big money for an operation that was nominally second to every other legacy airline when it came to advantages.

Jeff Smisek worked so hard to avoid the ugly girl that he made a compromised deal and the merger of equals ultimately resulted in a merger where United effectively took over Continental.

Let’s be clear about something:  Continental Airlines, at that time, had a great and profitable operation.  United Airlines did not.

United needed someone to move it past the Tilton Era and into competition with Delta.  Continental didn’t want to lose in the merger game but it had options.  At the least, Continental didn’t need to be the most eager bride around. I always thought it prescient that Smisek saw Continental as the bride rather than as the groom.  Sometimes our statements speak volumes.

Three years later, United doesn’t have it’s act together and it shows zero signs of getting its act together. I fully expect Jeff Smisek and his team to start getting smacked around pretty badly by financial analysts.  Particularly since even Southwest Airlines who merged with AirTran at the same time has now found itself experiencing great joy in the financials game.  The airline with the highest costs (Southwest) is beating an airline with lower costs (United).  Badly.

What to do?

In an ideal world, Smisek would take stock of whose departments ain’t making it and hire new people.  Go hire the best and get them from whoever he can.  Pay them what they need to make a jump.  And do it now, not 6 months from now.

The ranks need to see a new sheriff in town (even if he looks like the old one) and the executive team needs to get the message that performance does, in fact, count.

United employees are, traditionally, their own worse enemy and they remain so today.  They will sink that airline to spite their own faces and the worst part of it is that they will take very good Continental employees down with them.

It will cost to fire some of that executive team.  It won’t cost nearly as much as keeping them on.  Right now, it’s costing $609 million a quarter.

Share

Leave a Reply

Spam protection by WP Captcha-Free

Copyright © 2010 OneWaveMedia.Com