United Airlines has posted a $620million loss for the 4th quarter and a 2012 loss of $723 million and that, my friends, isn’t trivial.  Conventional wisdom has it that this is the cost of a poor integration.  I think the integration has gone poorly and has impacted the company but I think the poor integration is an indicator of something else.

This management team isn’t working very well together.

We are at the point where United should be seeing its operations mesh together nicely and, instead, we’re seeing ever greater impacts from the merger on the bottom line.  Good, strong management working together makes this airline work better, not worse.  It’s notable that the combined operation earned $840 million in profit for 2011 when it really wasn’t integrated.   In one year, there is a direction change equivalent of 180 degrees.

This is a management problem.   Various management groups are executing the integration of their parts without regard to whether or not other parts are ready for that integration.  This is the source of their reservations integration.  It was pushed forward despite other parties not being ready so that a box could be checked on integration progress.

At some point, this becomes intolerable to external stakeholders.  In the meantime, I would hope that leadership calls a halt to integration efforts and executes a 360 degree review of each department and what its progress has been to date and what each expect to accomplish before allowing anyone to move forward any further.  In that process, I would hope that managers who are executing without coordination are replaced with managers who understand that this is a dance party that needs to work together rather than just a group of individuals seeking an ultimate payout as reward for checking the box.

Jeff Smisek described the integration being particularly tough in 2012 but also declared that things were back on track.  My problem with that is that just because you say it, doesn’t make it so.  Time will tell but, for the moment, a huge 4th quarter loss contrasted against other airlines who’ve had great years doesn’t signal that things are “back on track.”

Filed under: Airline News, Mergers and Bankruptcy by ajax