Friday, February 15, 2013
Airline mergers not always great news
National Press Club -- With recent news of a merger between American Airlines and US Airways, the airline industry seems to be headed toward four "super-airlines" dominating the market. Recent mergers have consolidated brands and routes across the country, but passengers do not benefit.
For the past three years of reports, US Airways has consistently ranked higher than American Airlines, based on the annual Airline Quality Rating www.airlinequalityrating.com conducted by Dr. Brent Bowen of Purdue University and Dr. Dean Headley of Wichita State University.
Recent airline mergers may jeopardize gains in industry performance because it can take years for two airlines to successfully synchronize their systems and culture the researchers confirm.
American Airlines planned merger with USAirways will create an oversized bastion of mediocrity that will serve the public in far poorer fashion, according to Dr. Brent Bowen, Purdue University professor responsible for the annual Airline Quality Rating (AQR) report.
Bowen says every merger over the past 25 years has resulted in each of the two airlines significantly declining across the board in key performance benchmarks such as late flights, lost luggage, and reduced customer satisfaction.
"There will be no benefits to performance and consumers will not see better quality," Bowen said. "Employees of both airlines will be unhappy and destabilized for an extended period."
USAirways has consistently outscored American over the past five years in the AQR but the smaller partner will not have the heft to bring up the performance of the larger company during the inevitable clash of corporate cultures and technology, Bowen said.
In the 2008 AQR report, American placed 9th overall. Since then, their performance in the rankings has steadily worsened, while US Airways' ranking has improved.
Following the United-Continental merger, the DOT reported that customer complaints increased, as did lost baggage. Headley suspects that the company's $3 billion merger with Continental Airlines is to blame. "Anytime you have two airlines trying to combine, one of those airlines is going to have a period of decline."
Along with performance fluctuations, mergers can have severe consequences for employees. Concerns about layoffs, future salaries, seniority, and pension plans can drive tension that damages employee morale and lowers the quality of customer service.