The day has finally come. Assuming the feds approve it, American and US Airways are now set to merge forming the real “new” American. You all know that I support this merger. Having come up in this industry under the very same America West team that will now run the largest airline in the world, I couldn’t be happier to see them with such an incredible opportunity. But just because I like the plan doesn’t mean I think it’s going to be all sunshine and rainbows.
No merger is easy, and this will not be an exception. The good news, however, is that this team has been there before. America West ran into all kinds of issues during its acquisition of US Airways and this team has no doubt learned from that. That being said, there are plenty of potential pitfalls ahead. They can start laying groundwork now, but once the deal closes in the next few months, here are just some of the things that need to be dealt with, listed in no particular order.
Realize You are Not US Airways
I really don’t think this needs to be said, but there are plenty of skeptics who disagree. There are some who think that the US Airways management team is going to come in and run American like US Airways. That to me is a silly notion, and it would fail. This management team knows that it needs to quickly get into the mindset that it is now running one of the great global airlines. I really don’t think this is an issue – there has been plenty of time to plan for this – but it can’t hurt to repeat it.
Dial Back the External Marketing
American has been on a crazy marketing kick lately. The airline has put out a new brand image, new paint scheme, and new amenities. Some of these amenities are good and will remain while others aren’t and will disappear. But one thing is clear – these amenities are almost universally non-existent in the current fleet. Despite this fact, American has been pushing the whole “new American” thing pretty hard. (If I see that in another hashtag on Twitter from the @AmericanAir account, I’m going to be sick.)
All this is doing is setting expectations even more unrealistically high. It’s not the time to talk about that. Get the house in order first. Start rolling out the improvements, get the airlines on the same track, and then worry about marketing externally when you have critical mass. For now, focus marketing efforts in a different way.
Turn Internal Marketing to 11
A lot of current employees at American have been unhappy with their current management team. Meanwhile, in Arizona, a lot of US Airways folks are feeling very uneasy about their future prospects in Texas (if they’re even willing to make the move). American needs to focus all of its marketing efforts internally. Let people know what’s going on and make them feel comfortable. Make sure the current American folks know that this isn’t going to be a complete sweeping out of current people. They need to know that their work is valued and they should be part of the combined airline.
Meanwhile the team in Arizona needs to know what’s going on. Will they be forced to move? If so, what kind of incentive will US Airways provide to make it worthwhile? And this doesn’t even touch on the front line people who will naturally be concerned as well. They all need to be hear from management frequently, loudly, and clearly. And they need to be told the truth. I’ve already seen employee communications coming out of Tempe for the US Airways folks. That’s a good start.
Get Rid of the Old American
Sure, technically everyone who works at American today is part of the old American, but that’s not what I mean. There are key people – and processes – that epitomize the old American and those need to be swept out quickly. If these folks don’t see the writing on the wall, then the new management team needs to act. Number one on that list is, of course, Tom Horton, but they can’t officially sweep him out because he had to stay on as part of the deal as Non-Executive Chairman. But really, he needs to become Non-Existent Chairman. From the looks of this deal, he won’t be around much and it won’t be for very long.
But it’s not just Horton. There are others at the top who will remain nameless that need to go. At the same time, there are some really great VPs that the new management team needs to woo to keep them onboard. The culture of the new American will start at the top, so the people up there need to be in place sooner rather than later and they need to really focus on solidifying the new combined culture.
Work on Labor
This story has been beaten to death, so I won’t bother digging into it. The point is that there are a lot of labor groups that need to come together. While there’s very little that an airline can do to create a new seniority list, it can at least present an interest in working together and put forward a solid effort to being available to help conclude a deal in any way it can. That’s already been made pretty clear with the inclusion of unions in the process so far.
Protect the Brand Assets
As things churn forward, American needs to be sure to protect its brand assets. None is bigger than AAdvantage, one of the best frequent flier programs out there. The temptation is always there to devalue it, but American as a brand has been devalued for years, and people are going to be tempted to flee during the prospect of another tough merger. So if you’re American, you need to focus on the things that really have strong value, and AAdvantage is one of them. Use the program to bring people back to the airline.
Craft the Network
Of course there will be a focus on growing revenue, but a key piece of that is building a competitive network. That is undoubtedly going to mean cuts in some places, additions in others, and shifting of resources all around the network. I expect that we’ll see all the hubs remain in some form (that’s been officially stated), but they will end up looking different after the network has been rebuilt, and they might not all even look like hubs.
One of the big questions will be around what to do in Asia. There aren’t any easy solutions on that one, but something will have to be done so that American can serve the needs of its frequent fliers. (I’ll write about the network in more detail soon.)
Do Tech Right
I’ll end with one last note. We saw it with US Airways/America West and it’s been a bigger nightmare with United/Continental. Don’t rush the tech transition. Just make sure it’s done well. Take all the time you need. Just don’t mess it up.
This post is, of course, premature. The deal still needs to pass review with the feds before it can be officially completed. But the expectation is that the deal should go through with just a few minor divestitures, if any. (Maybe some slots at Washington/National.) In the meantime, the work can already begin behind the scenes to build the new airline. It’s going to be a long slog, as we all know, but in the end, it’s going to be a good thing.