Well, after spending 45 years in the ad agency business I guess I have seen my share of disingenuous ads – and maybe even written a few myself. But the Delta/NWA ad in the Friday, April 18 Twin city newspapers probably wins the first place award. And additionally, really calls into play the value, benefits and prospects for success of this merger.
The first thing to consider is who benefits from this action? If there are no real or wide ranging benefits, why do it? So, let’s consider the “alleged” benefits as promised in the ad.
The big cohune is “the continued access to destinations worldwide”. Note the word “continued”. We have that NOW! In fact, a multitude of destinations has been a continuing promotional theme of NWA over the years – and as a major hub, we have never really been shortchanged in convenient travel anywhere. The larger complaint is because NWA does have so many gates, we have been forced, on occasion, to pay higher fares. Those same conditions: many destinations… many gates…and monopoly fares will continue to exist, while the only change will be the tail painting on the rear of the aircraft. In fact, the monopoly fare component almost certainly will get even worse.
The second “benefit” in the ad is “more stable platform for future growth”. There is no substance beneath this claim. It is merely “ad speak”, and is meaningless. There is little or nothing these airlines could not do to improve themselves as separate entities if they had the will (or the skill) to do it.
Thirdly, the ad purports “a commitment to retain jobs in Minnesota”. We have heard this one before – with absolutely no loyalty to the state even with millions invested in the promise. Fool me once, and it is my fault…fool me twice and, well you know that answer.
Finally, the ad promises”better seats and refurbishing cabin interiors”. We need a major merger for this?
The facts are, when two weak entities unite, it does not usually create a single strong one. Most often, it simply means a LARGER weak entity. Why? Because the same structural defects imbedded in the merging partners is typically brought into the merged company. This is especially evident in this merger. (I guess also described as the “baggage” the entities bring into the alliance – although in the case of NWA I suppose they might lose the baggage).
Consider rising fuel costs (the merger does nothing to ameliorate those). Poor employee relations (the merger will likely exacerbate those, with the pilots already upset and in a rebellious mood). An ageing and disparate fleet with over a dozen different types of aircraft and over 1000 planes, many of a legacy vintage. The critical element in the success of profitable airlines is to have fewer types of aircraft (for simplified maintenance) and a more modern fleet, as does say Southwest with only variations of a single aircraft type. The Delta/NWA merger will create a fleet as messy as any in the industry. Maybe even the worst.
If a larger entity does not necessarily bring better results, why are the managements of these two airlines proposing it? A major reason in such actions is that larger organizations and greater top line revenues justify greater compensation for key executives – though not necessarily a rationale to trickle down below that level. It has been a major driver to effect such mergers by top management. Promises of greater compensation for the NWA execs has already been proposed even at the inception of the merger process.
Which brings back to the first question….who benefits? Well, let’s turn it around, and see who is harmed. In order of damage, the first might be the state. The current appointees to the MAC are likely to “negotiate” the millions owed to Minnesota by NWA for past favors, and the current state administration has shown no evidence they will fight vigorously for the taxpayers on this issue (at least not up to now). It would be nice to see the Governor show some spine and commitment on this issue, and soon.
The second “victims” will clearly be the employees of both airlines, but likely mostly our Minnesota NWA contingent. If there are to be any economies of scale in this deal, it will come out the hide of employees – this, despite the promises in the ad to “retain significant jobs” in the state. The headquarters staff has already been planned to be decimated. There is also the complication of union vs. non-union employees within the ranks of the merging partners. The third most damaged group will be the traveling public – again mostly in Minnesota. We can travel anywhere in the world right now pre-merger, and rarely if ever does less competition bring greater benefit or lower prices to any consumer merger. The final, but possibly least damaged group may be the shareholders, if as frequently happens, this merger does not bode well for the new entity. There is a long and detailed history of such negative results; with studies done by many professionals indicating disappointing economic benefits or outright failure of such mergers in the past.
So, who will benefit. Well, at the top of that food chain will be the key executives who have planned this debacle. The same ones who took both airlines into bankruptcy in years past. So watch your head in the coming months…there will be golden parachutes aplenty dropping from the skies.