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On the Same Flight Plan

January 20, 2006
It’s a frigid December day at Philadelphia International Airport, and Doug Parker, the new CEO of the recently merged US Airways Group and America West Holdings, is here to hold one in a series of town hall meetings with employees.

    The affable executive from Arizona, where he headed America West before the merger, is traveling with Larry Le­Sueur, the company’s newly appointed vice president of culture integration, a title that tells volumes about the airline’s overarching concern about bringing together 21,000 US Airways employees with America West’s 14,000 workers. Melding the two corporate cultures--button-down, East Coast US Airways, which has been around since 1939, and easygoing, Southwest-based

    America West, which has been flying for only two decades--is a monumental task.

    "This is a teamwork business," Parker says. "You have to have people work together in some sort of team. I want to mold (the two companies) into one culture but still keep the best of both cultures. That’s the only way this is going to work."

    The merger deal, worth $1.5 billion, was billed as a way to make both carriers more efficient, with executives projecting $600 million in cost cuts and revenue enhancements as the companies combine in the next two to three years. The goal is to create a financially stable firm from two struggling airlines--especially critical for the US Airways organization, which only recently emerged from bankruptcy--and for the company to weather oil price fluctuations and compete with highly successful low-cost competitors such as JetBlue and Southwest Airlines.

    Since the merger was completed on September 27, US Airways’ stock has almost doubled to about $40 per share. But, analysts warn, the health of the company is dependent upon good workforce management. It’s often the inability to combine the employee groups following a merger that dooms organizations, they say.

    A 2003 Federal Trade Commission report, "The Effects of Mergers and Postmerger Integration," shows that in a majority of U.S. mergers, sales growth actually declines postmerger for both entities. The inability to successfully combine the two work groups is the main reason for the failure.

    "Managing the cultures postmerger is critically important, but most executives tend to undermanage the culture differences," says Mitchell Marks, president of Joining Force.org and author of Joining Forces: Making One Plus One Equal Three in Mergers, Acquisitions and Alliances.

    This can lead to discontent, loss of productivity and retention problems as employees wonder what the future holds. "In mergers, culture is a lot like breathing," Marks says. "You don’t have to think about breathing until something threatens your ability to breathe. That’s the same thing with cultures in a merger." He says he’s encouraged by US Airways’ early focus on culture, but thinks the company faces an uphill battle.

    To many workers at beleaguered US Airways, Parker is just another CEO come to make promises they’ve heard before. He’s even more suspect to pre-merger US Airways workers because he came from "the other" airline and then moved the company’s headquarters from Arlington, Virginia, to Tempe, Arizona. Parker says he understands the skepticism. "It’s fine to feel that way," he notes. "I understand it, and I can’t change their minds overnight."

    Given the difference in the ages of the two companies, the top labor sticking point will be dealing with seniority. US Airways employees, for the most part, have logged more years at work and want their pay and benefits to reflect their longer tenures. And workers from both carriers want to make sure they keep their jobs as executives scramble to cut costs at what is now the fifth-largest U.S. airline.

Cutting bureaucracy
    Despite that fact that America West is the smaller airline of the two, the combined company’s new brass is mainly from the Arizona-based carrier. Winston Robotham, a ramp agent at Philadelphia International and a 22-year US Airways veteran, says that so far, members of the new leadership "seem to be listening to us. But we’ll have to wait and see what happens with lots of work issues."


"Mergers are stressful for everybody involved," LeSueur says. "One of the big problems is the rumor mill."
--Larry LeSueur,
VP of culture integration

    Parker has a stealthy weapon in his arsenal--LeSueur, the unassuming, ever-smiling man standing near him in the cold stairwell of Gate B6. LeSueur already has helped spearhead an array of initiatives to make the workforce merger go smoothly. These range from events like the town hall meetings with employees around the country to local actions such as a postmerger contest in which employees decorated their workspaces, and providing free meals for workers who had to punch in during the holidays.

    But at the heart of the company’s business strategy is a plan to train managers in the trenches to make certain the integration goes smoothly. In December, customer service managers from throughout the airline were summoned to Arizona for a meeting to discuss the future of the airline and how best to integrate the workforce. The company is developing a manager training program, but has no specifics yet.

    The critical point is empowering the managers and workers on the front line to make decisions on their own whenever possible and to bypass the corporate bureaucracy that mired US Airways. It is this kind of change that has made upstart, low-cost carriers like JetBlue and Southwest so successful, and that’s what the new US Airways wants to someday embody, LeSueur says.

    Frontline managers will be the key, he adds, and "as with any company, there are some that don’t know how to set high standards, and fail to help employees deliver a high level of service and struggle to support our people and effectively communicate. If someone does not have the necessary skills, that person can’t stay in the job."

    LeSueur reports directly to Elise Eberwein, who is head of corporate communication and culture for the combined company, but he also has Parker’s ear. He has been given the authority, according to US Airways’ top brass, to oversee the integration process between US Airways and America West.

    He says the job sort of fell into his lap. He was vice president of the Phoenix hub for America West, and after the merger he figured he’d be given additional airports to run. Then he got a call from management offering him the new post.

    "I was told the integration process was the No. 1 challenge given the two different cultures," he recalls.

    LeSueur began working at America West in 1984 as a part-time ramp agent and has held a variety of posts, including senior director of reservations. One of his greatest strengths may be that he’s well-liked and trusted by many America West employees. He’s trying to engender that trust among the US Airways workers by making frequent trips to hubs around the country and by having an open-door policy.

    As he strolls through the Philadelphia airport, his eighth visit there since the merger, rank-and-file reservation agents, luggage handlers and low-level managers call him by his first name. Some stop to thank him for his efforts thus far; others express their concerns about the merger.

    "Mergers are stressful for everybody involved," LeSueur says. "One of the big problems is the rumor mill." If he can meet an employee face to face, he says he’s able to quickly dispel rumors about layoffs or changes in work rules or benefits.

    With major issues such as worker seniority at the two carriers to address and union contract negotiations under way, LeSueur says he knows it’s going to be difficult "managing everybody’s expectations because everybody has different ones. And yes, a free meal is great, but at the end of the day the most important thing to people is if you care about them. Communications will be key in getting the message across that we truly want to work together and respect each other and have a common goal."

Early optimism
    Jack Stephan, a spokesman for US Airways’ pilots union, says that one of the biggest problems for its members traditionally has been the many layers pilots had to go through to get basic questions answered. He says the pilots are already seeing signs that the bureaucracy is shrinking. "We are cautiously, and I’d underline ‘cautiously,’ optimistic about dealing with the new management," he notes. "All the things they’ve done so far are nice, but we’re hoping it’s not just window dressing."

    Early this month, the America West name became almost extinct as former America West reservation agents began answering the phone "US Airways" and gate agents and flight crews began referring to all flights as US Airways flights. But US Airways executives did not march in at the time of the merger and change the way the carrier’s planes look. The entire America West fleet won’t be repainted with the new US Airways scheme until the end of the year.

    While many of the steps that US Airways’ new management has taken might sound encouraging, time and the never-ending focus on the bottom line could derail successful merger efforts, says Mac Regan, a New York-based worldwide partner for Mercer Human Resource Consulting. Wall Street will be breathing down CEO Parker’s neck to enhance profitability, Regan says, and the company will want results overnight. But melding work groups into a cohesive, productive team--which in turn will build a customer base--takes time.

    "Look at what many Japanese companies do," Regan notes. "They might take 10 years before they are profitable because they don’t just focus on the short term." Regan says it’s too early to know whether Parker has what it takes, but he believes the new CEO does seem to realize there are no quick remedies.

    As Parker greets employees just off the tarmac at the frozen Philadelphia airport, he says he wants US Airways employees to know that the company is changing in a positive direction. "As much as I would like them to see that this (company) will be different, I know trust is earned," he adds. "I’m going to earn it."

Workforce Management, January 16, 2006, p. 1, 22-28 -- Subscribe Now!