April 15, 2024

Delta-Northwest Merger’s Long and Complex Path

Airline mergers are complex and tough to pull off — witness the troubled marriage of People Express and Continental Airlines in the 1980s or the continuing problems in integrating America West and US Airways six years after their merger. So when Delta Air Lines acquired Northwest three years ago, executives knew they would have to resolve major labor, technology and financial issues.

What they had not fully anticipated were the thousands of tiny details that go mostly unnoticed by passengers but can make the difference between a successful merger and a failed one.

All airlines have their own way of doing things, developed over time and through labor negotiations. All have specific working rules, flying procedures, maintenance schedules and computer programs. And all have their own cultures. Delta always thought of itself as the gracious host. Hence its flight attendants poured the requested drinks. Northwest was the practical carrier; its attendants just handed over the can.

“It was like Noah’s ark out here,” said Peter Wilander, an executive at Delta responsible for in-flight services. “We had two of everything.”

Delta executives agreed earlier this month to discuss the minutiae of the Northwest merger to make the broader point that combining two airlines is an incredibly difficult task. The Delta-Northwest tie-up is now widely seen as a success, and that view laid the groundwork for two other, more recent mergers: United Airlines with Continental last fall and Southwest Airlines and AirTran, which was completed just last week.

“If you look at the history of mergers, the assumption was that you couldn’t do them successfully,” said Richard Anderson, Delta’s chief executive. “Everybody had come to the conclusion that these things are too big, too complex and too unwieldy to manage.”

Delta’s merger with Northwest was announced in April 2008 and closed in October of that year after receiving regulatory and shareholder approval. And yet it still took 14 more months for the airlines to fly as a single carrier, in January 2010.

Delta scored a major point by getting its pilot unions to agree to a common contract by the time the merger closed. Many analysts said this gave the airline a critical advantage by getting a crucial labor group on board from the start.

But that did not put an end to Delta’s labor issues. Flight attendant representatives accused the airline of using intimidation tactics after they lost a bid to unionize the carrier’s work force in November. The matter is under review by the National Mediation Board, which could call a new election.

Meanwhile, flight attendants from Delta and Northwest continue to work under separate contracts, each with their own work rules, and they cannot be scheduled to fly on the same airplanes.

And some merger-related work is still going on. The last Northwest plane was repainted only six weeks ago. Delta expects to spend another year completing an inventory of all airplane parts and maintenance procedures into a new database.

Each airline has hundreds of different technologies that book seats, print tickets or dispatch crews that need to be integrated. Failure here can leave thousands of travelers without a seat if bookings are misplaced.

Delta’s chief information officer, Theresa Wise, said the airline had to merge 1,199 computer systems down to about 600, including one — a component within the airline’s reservation system — dating from 1966.

The challenge, she said, was to switch the systems progressively so that passengers would not notice. Ms. Wise, who has a doctorate in applied mathematics, devised a low-tech solution: she set up a timeline of the steps that had to be performed by pinning colored Post-it notes on the wall of a conference room.

A major switch happened when the new airline canceled all Northwest’s bookings and transferred them to newly created Delta flights in January 2010. It required computer engineers to perform 8,856 separate steps stretched out over several days.

Article source: http://feeds.nytimes.com/click.phdo?i=9ee3673b7efa50753441b86bd943798c

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