Consolidation rules.

The news that United Airlines and Continental have merged is the latest in a long line of consolidation to happen in the airline industry. It won’t be the last as airlines seek new partners to re energise their share price or look for greater market share. The trick will be to make sure the merging cultures assimilate and work as one unit. With a swag of unions involved and staff carrying the ubiquitous baggage it will be difficult in the short term to turn mergers like this into finely tuned machines of profitability.

So how long have they got? A piece of string comes to mind as the market will decide in the end if the process is worth the wait.

Years ago there was talk of 6 major global airlines but this has not come close to fruition as the proliferation of low cost carriers continues while the legacy carriers look for new partners to sustain their longevity. I don’t know why American Airlines doesn’t merge with Denim Air. Think of the marketing opportunities they could link up with Levis, as American Denim, “Flying by the seat of our pants”.
Or the tastier compilation of Malaysian Airlines merging with LACSA working with the local coconut milk producer splashed across their planes, as supplier to Malaysian LACSA.

Aside from deciding on the best branding for the merger, companies must decide how to divide up the management team and this can be the most serious decision as it filters down to all others engaged in the merger. The cultural direction will come from this new team and they need to decide on how this decision will play out in the short term and the long term. Do they bring old culture with them, do they adopt the culture of the other team or try and bring in a fresh approach. All three are difficult without employee engagement, guided by proper communications outlining a clear direction. The fallout can be disastrous if knowledge and intellectual property is lost via management reshuffles and employee cost cutting.

British Airways is a good candidate as an airline in flux needing a serious partner to bring stability and profitability but how do they find each other? It’s not like there is an airline bar they all frequent to chat over martinis and gaze longingly at each other’s profit and loss statements?

A third party consulting team who have the best intentions of both parties at heart, is difficult to find nowadays. Everyone is working for one side against the other so that there is an advantage to be held. A great marriage broker who understands the baggage (get it airlines?) each party brings to the table is the ultimate requirement to get it done.

Right now Willie Walsh would likely accept overtures from any party as long as they had hair and teeth, so to speak. I’m thinking Jamaican Airways would give them a more laid back approach, especially when it came to negotiations over morning tea and those special cookies with the Rastafarian ingredients. Or what about a merge with the competition? British Virgin has a ring about it.

I’m sure it’s crossed Richard’s mind.

Time has to be running out.