Airline mergers always bring labor unrest. One of the purposes of industry marriages is to cut costs, and that almost always involves firing workers. The most important tool that airline workers have in the battle to save jobs is work stoppages. British Airways, in the midst of a massive labor walkout, has found out the hard way how much its workers can cripple its operations.
The Delta (NYSE: DAL) merger with UAL (NASDAQ: UAUA) was bound to bring a worker response, and now, as the M&A work progresses. employees have begun to protest.
According to The Wall Street Journal, “Delta Air Lines Inc., on the heels of last month’s federal rule change making it easier for aviation workers to organize, is facing a stepped-up recruitment campaign by labor organizers.”
Delta will argue that it can cut its workforce as part of the UAL merger, and that is almost certainly true . But, unions are stubborn on matters of job preservation, even in the face of court orders.
The Delta transaction with UAL was born of the same strategy as the Delta buyout of NWA. Not only is a huge carrier more efficient; it also has a larger route network to use to keep its customers and bring new ones from rivals. But, those rivals usually take advantage of the labor and IT integration disruptions of mergers and the net gain of passengers for the new carrier may never happen.
It is easy to forget that the most successful carriers over time have not been involved in marriages, at least not many and none of them recently. Southwest is the most profitable airline in the US. By contrast, companies with large global route structures like JAL, BA, and Swissair have been in great financial distress and at times the massive firms have even gone into bankruptcy.
Bigger is better, but not often.
Douglas A. McIntyre
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