Mergers - problems first, synergies later

I was searching through iTunes recently for some new business related podcasts to explore in addition to the excellent BBC Radio programmes The Bottom Line, On The Money and Peter Day’s World Of Business and found the Bloomberg Business Week podcasts. In these short (around 10 minutes) programmes specific businesses and issues they have faced are explored. Among these was an excellent feature on the merger in the USA between Continental and United Airlines.

The merger was completed in 2010 and 2 years later they have yet to resolve issues such as a common uniform for flight attendants and pay agreements. Whilst the Bloomberg team believe the merger will deliver synergies and significant cost savings for the enlarged business, in the podcast they highlight some issues which had to be resolved, including:

Suppliers - each airline had its own suppliers and they had to decide upon a common supplier for the new company. For example, the airlines served different coffee, so research was conducted to see which was preferred (including taste tests by airline crew) and a decision was made, The passengers of one airline hated the new coffee and they dicovered that the equipment used to make the coffee was different on each airline’s planes, meaning the coffee tasted bitter on one airline but not the other…

Flight monitoring - a condition of the merger, imposed by the US aviation authorities, was that the merged airlines have one control centre monitoring all flights. There were two bases, so they had to decide where to operate from, get the data ready and then switch off the systems, monitor flights manually, upload the data and pray that it worked when they switched the system back on. If not, all flights would have to be cancelled until the system was working. Such a delay could cost the airline millions of dollars and damage its reputation.

Boarding - each airline had a different system for boarding passengers and checking tickets. It was a while before ticketing was harmonised and the two airlines’ systems didn’t talk to one another, meaning staff had to radio through for information, potential delays for pasengers, and so on.

What this brought home to me is that the success of a merger not only depends upon harmonising the cultures of the different companies and product ranges/service offerings but also upon the small things. Coffee anyone?