Parker agrees with DL CEO advise about IT systems

[WorldTraveler]

http://www.thestreet.com/story/11858841/1/delta-ceo-offered-merger-tip-to-us-airways-ceo.html

Apparently, Parker is able to learn from his mistakes and follow the pattern of those who have done mergers right.

Guess the US folks will be learning new systems and processes.

"Asked Monday at an investor conference what he needs to be careful about as he oversees the merger of US Airways with American (AAMRQ.PK), Parker cited advice from Delta (DAL_) CEO Richard Anderson.

"Anderson's words, Parker said, were "Adopt and Go," which summarizes the importance of "taking the larger airline's systems and processes and overlaying those on the smaller airline." Parker recalled a mistake following the 2005 US Airways/America West merger, when "we had largely the America West management team, and we had some systems better than US Airways and we put those in place." Most notably, the merged carrier chose America West's Shares reservations system over US Airways' Sabre system."

 

[IORFA]

He said that on February 14. Nothing new here. Basically said things would be done the current AA way.

 

[WorldTraveler]

but you know it will frost a whole lot of people to acknowledge that Parker is listening to and taking the adviCe of DL's CEO

 

[IORFA]

Now it is only because DL's CEO told him to do it? PRICELESS!!!

 

[WorldTraveler]

no, it is because it WORKS. Parker is a smart businessman.

He made his mistakes with the HP-US IT systems but recognizes that DL did it right.
Although the original proposal was to take NW's res system, DL decided shortly after that the costs would be much higher and stuck w/ DL's res system, web, and most back office systems. A number of key NW applications were kept and converted to work w/ DL's IT systems.

Parker obviously learned that lesson and wants a cutover that is as hassle free as possible.

In the aftermath of a disastrous year at UA who ditched UA's legacy systems, Parker said exactly what Wall Street wanted to hear... and was happy to acknowledge that they will take the path that has worked for a competitor to ensure that AA-US' merger has as few chances to fail because of IT issues as possible.

I think they'll get it right, quite frankly.

 

[robbedagain]

wt i think youre right in that respect that dp will more than do his best to avoid the issues of the it i think he wants to keep it as problem free as possible but of course there will always be issues but minimize the problems as much as possible i think the biggest issues will come in labor depart more so than the it dept. i believe aa uses an advanced system of sabre but i could be wrong on that

 

[IORFA]

Yeah, but because he figured out the mistake on his own you want to imply that DL is behind his decisions. Whatever. Keep tooting your horn. You are impossible. You claim he is smart, yet preface it by saying it is because you think he is listening to Anderson. HAHAHA. The more important thing I took from the article was at the end where Parker said they will look into the mistake on the tail. However slim the chances are that the mistake will change, we can only hope Horton's kids art project goes away, and fast!

 

[WorldTraveler]

did you read the article and the quote Parker made?

It specifically says he listened to Anderson's advice.

Of course Parker is smart. He cannot afford to run the risk of an IT failure like UA has had. Being smart is listening to the success of others, regardless of whether they are competitors or not. Wall Street wants to know that Parker won't make the same mistake he made before or that UA just made.

By acknowledging that DL did it right and he is accepting Anderson's advice, Parker is soothing Wall Street concerns about potential IT problems.

The tail is between you and Parker to work out.

As for labor, I would genuinely hope they would work w/ Parker and whoever his successor will be, if Parker isn't retained beyond the initial period.

Parker again was smart enough to get labor on board and he has the opportunity to redefine the way labor relationships between most heavily unionized airlines has gone during mergers.

 

[UPNAWAY]

I think it is smart to merge first and the easiest way is to adopt the larger systems, but that doesn't mean you cannot address issues and look at complete upgrades or new systems 2-3 years down the line.

 

[john john]

I think it is smart to merge first and the easiest way is to adopt the larger systems, but that doesn't mean you cannot address issues and look at complete upgrades or new systems 2-3 years down the line.

Yea that is what DP did last merger

 

[eolesen]

All Anderson did is state the obvious -- you go with the systems that require the least amount of integration. It's hardly some panacea of merger advice...

Not that I'd know anything, with this being my day job, but it's the same advice we would have given as well, and they don't use our PSS platform.

Th DL-NW IT integration worked not because they used the larger airline's systems, but because DL had invested heavily in developing the "Delta Nervous System" prior to the merger. NW had done some tactical upgrades and had some better pockets of technology, but on the larger scale, it posed some significant landmines when it came to integrating the rest.

You also have to remember these comments were made at a dog & pony show for investors. They wanted to hear there wouldn't be a repeat of United's debacle.

UA's meltdown wasn't a matter of applying the smaller carrier's IT, but more related to rushing the process, carrying out a "not invented here" mindset and eradicating all traces of pm-UA's IT. Neither airline had stellar IT platforms. We'd advised that they migrate both to a more stable platform, but CO balked. UA had an existing contract for Altea, and CO paid their way out of it. How much they paid is a matter of public record, and it's likely less than what they've lost in disruption expense, loss of customers, and damage to their brand.

Worse, UA chose to rush the system out with only a cryptic interface available, and not a GUI. The GUI rolled out six months later, and POOF!, the bulk of the problems subsided markedly.

I think it is smart to merge first and the easiest way is to adopt the larger systems, but that doesn't mean you cannot address issues and look at complete upgrades or new systems 2-3 years down the line.

It's also no great trade secret that both AA and US had embarked on the RFI/RFP process to replace their current legacy platform, and as those are 24-36 month projects, they would have to consolidate if there's going to be a Customer Day One consolidation of systems.

Again, it's common sense, and not some new & radical thinking coming only out of the Atlanta brain-trust. Referring to Anderson was just convenient name-dropping that the audience would be able to relate to.

 

[WorldTraveler]

It was precisely because the DL DNS (nervous system) concept did not exist at NW that DL would have had to undo alot of Delta IT features.

While the concept wasn't breathtakingly novel in concept, HP/US did not choose that approach and neither did UA/CO. In both cases mgmt. came heavily from the smaller carrier in the merger who had worked w/ much less connection to traditional GDS systems.

DL's decision was between using Pars/WSPN which was the basis of NW's system or DLMatic which was built on a res system that existed solely for DL's purposes and had no agency/outside users.

No one said it was a novel concept but two legacy airlines didn't follow the logic to their peril.

And the issue is not just about IT systems. It also involved operating certificate issues. DL largely went w/ its own procedures even though they knew that NW had a number of programs that were probably better... because the FAA wouldn't accept a "little of this" and a "little of that". DL merged the airlines, used DL procedures for all fleet types that were in common, used NW procedures for non-DL aircraft that were significantly different - and got the single ops certificate. They have sense began to incorporate changes after the fact and after the training curve.

Remember that the biggest impediment to a merger WRT IT is not necessarily the machines but the people who use them.

UA's problem was that they blasted thru the cutover w/ very poor training and backup even though the UA and CO res systems had significant differences. In contrast, DL took a lot more time even though the differences between DL and NW's systems were comparatively smaller.

The point is that AA-US has learned from the mistakes of others - that is the benefit of going last. AA got thru BK faster than others... we can hope the merger will be equally impved because of being able to learn from what others did.....good, bad, or indifferent.

that is the real point of what Parker said.

 

[eolesen]

I think I know how mergers and integrations work -- that's been part of my day job for a couple years...

What both the original HP/US and CO/UA share from their past experience was displaying an arrogance that it was their way or the highway.

It's hard *not* to learn from that type mistake, especially when it results in bad press. Yet it was easier for Parker to namedrop Anderson at the conference than it was to admit they'd screwed up their last merger. It obviously worked on you -- you immediately believe it will be a success because it's now associated with DL. Had they simply said they'd learned from past mistakes, nobody would take something that benign at face value.

And you're flat-out wrong that the FAA won't accept a pinch of this and a dash of that. AA adopted several procedures from TW which were integrated into the opspec, some visible to customers, most not. It's all in how you present it and train your people.

Maybe DL simply didn't feel comfortable taking that approach since they had all of the labor issues unresolved, and wanted to keep the illusion that they were in control...

Labor shouldn't be a problem in this integration as far as training and procedures go. Seniority will be another story altogether.

 

[WorldTraveler]

the FAA won't accept a significant mixture of two types of systems... yes, a little of this or that is not a problem but as I recall HP and US did a lot more than pinch of this in their operational merger and it took a lot longer to get their single ops cert.

As much as it slays you to admit it, DL pulled off the best merger of any of its peers. That is why Parker name dropped Anderson and said he would follow in DL's footsteps.

DL had a pilot labor agreement in the bag before the merger was announced - not just an IOU, but an agreement.

The labor status of the other groups had nothing to do with the IT or procedural choices.... after all, the DL systems were largely chosen. If DL was afraid of NW labor, they certainly wouldn't have moved to adopt DL systems so quickly.

DL had a more developed IT system - in large part because DL was behind the curve compared to NW's IT development when DL started.... DL's IT systems were better than AA's but I would imagine that AA as a result of this merger and its own IT upgrades will move into the top of the industry.

As much as you want to make it personal and have a hard time admitting that some one else does something right, it is really pretty common sense.

Of course, HP and UA both had a "my way or the highway" mindset... but Parker wanted to say what Wall Street wanted to hear... this was an investor conference, remember. The chances are real high that it will actually do it - and make absolutely no mention of DL's successes in any of its internal memos.

 

[eolesen]

As much as you want to make it personal and have a hard time admitting that some one else does something right, it is really pretty common sense.

Corrected your sentence: "As much as I want to make it all about Delta, and have a hard time admitting that it has little to do with Delta, it really is pretty common sense."

Parker wanted to say what Wall Street wanted to hear... this was an investor conference, remember

Gee, thanks for bloviating a bit, and attempting to lecture me by saying pretty much the same thing I said two hours ago:

You also have to remember these comments were made at a dog & pony show for investors. They wanted to hear there wouldn't be a repeat of United's debacle.
...
Referring to Anderson was just convenient name-dropping that the audience would be able to relate to.