Is Airline Consolidation Bad for Travelers? Not Necessarily, US Airways Exec Says
TEMPE, Ariz. -- The last time there was consolidation in the airline industry, customers suffered.
In addition to offering fewer seats, the 2005 combination that formed US Airways Group Inc. forced together two dissonant operations that turned the carrier into an industry leader in lost bags and late flights.
Nevertheless, the carrier's new chief operating officer, Robert Isom, argues that industry consolidation can be good for travelers in the long run.
An airline that can bolster its finances, be it through an acquisition or some other way, will be in a better position to cater to its customers, Isom said in an interview with The Associated Press.
"Sure we've had a rough 12 to 18 months," he said. "But if you say, 'Hey, that's all contributing to an airline that can survive long into the future and can be very competitive in terms of operating results,' I'd say that's not such a bad news story."
US Airways, which has boosted profits since the acquisition, will prove it this year, he said.
Isom said the reservations system that plagued US Airways has been fixed, and during Thanksgiving, the airline posted its best on-time performance since carriers combined.
He expects US Airways customers to deal with fewer mishandled bags and its flights to be more reliably on-time this year. The airline's management also recently unveiled to staff its first joint operating strategy, which will focus on using technology to better position flight crews and allow operations to run more efficiently.
"Things will go wrong," he said. "You do have maintenance cancelations, you have weather issues. The airlines that distinguish themselves are how well they can recover. We don't do a great job right now."
Despite the changes at US Airways, Kevin Mitchell, president of the Business Travel Coalition, said the industry has a lot to prove to customers before they'll stop looking at mergers as a killer of customer service.
Mitchell said his organization surveyed 216 people who work in business travel last fall, and more than 70 percent said they were concerned with how airline consolidation would affect customer service.
"The notion that this is going to work and there's going to be this deep pocket to fund investments and customer service, I think, is a myth," he said.
For example, Mitchell said, airlines in the process of consolidation typically tout the amount of money they could save by cutting redundant flights and workers in the new operation. But much of those cost synergies likely would be gobbled up when the new airline meets with pilots, flight attendants and other employee groups who are no longer willing to take pay cuts to save the airline, he said.
"The benefit to these airlines is short-lived," Mitchell said. "They're going to get a bump for a couple of years, and then they're back to square one, and what we're left with are large dysfunctional families and years and years and years of customer service problems."
In US Airways case, it's still unclear whether Mitchell's prediction will prove true. The airline first said it would keep all of its employees on "cost-neutral" contracts that would keep its expenses down. As its pilots, flight attendants and other employee groups protested, management agreed to some raises.
But more than two years after the airlines combined, US Airways has yet to sign its major employee groups to combined contracts.
In the meantime, management has spent millions to revamp its flight operations system and is spending $50 million to upgrade the interiors of its airplanes.
It's new "Back to Basics" strategy also calls for electronic ticket scanners at every station, and a requirement for more information on every bag to ensure they go in the right place.
The airline also is installing an automated compensation program for customers on canceled flights that will quickly grant them vouchers, hotel rooms and other compensation.
The point is to keep the lines short at ticket counters, and when problems arise, to take care of them quickly, Isom said.
Isom, 44, who previously worked as a chief restructuring officer at GMAC and as a vice president in charge of customer service at Northwest Airlines, said he spent months monitoring flight operations and interviewing US Airways employees in numerous cities since he was hired in September.
He unveiled his new strategy earlier this month, inviting managers to Tempe to go over the details. The new plan is in its infancy, he said, adding that customers will hopefully notice changes this year.
"If you don't operate a reliable airline, you really have no chance," Isom said.
