Tilton's tough choice
UNITED | CEO must pick struggling US Airways or go it alone
United Airlines CEO Glenn Tilton faces tough choices. In the wake of the Continental Airlines board of directors' unanimous decision Sunday to abruptly end merger talks with United, Tilton must now decide whether to pursue a merger with the only remaining candidate -- a very tattered US Airways -- or try to carry on as is.
There are huge downsides to both options, which is sure to complicate Tilton's decision-making process. With almost every airline bottom line getting battered, Tilton clearly hungered for a merger with the well-run Continental, especially as Chicago-based United's financial picture quickly darkened during the past several months.
(AP)
United's first-quarter net loss -- a whopping $537 million -- coupled with Chief Financial Officer Jake Brace's refusal to predict what the carrier's financial situation might be by year's end, appear to have been key factors in Continental's abrupt decision to turn its back on United. Continental simply didn't want to hitch its fate to another airline whose prospects suddenly seemed dicey.
On Monday, Bloomberg News and the Associated Press, among others, reported that United, the second-largest airline, and US Airways, the seventh-largest, were in advanced talks and expected to be able to announce a deal within weeks.
Now, if Tilton is to get his merger, he must deal with US Airways, which has been beset by major problems since its merger nearly three years ago with America West. US Airways wound up dead last among all legacy airlines in the respected 2007 Airline Quality Rating Report released earlier this month. That's a sure sign United isn't dealing with a class act in commercial aviation, as well as a reason for United's loyal customer base to be worried about the fallout from a merger with US Airways.
What's more, US Airways CEO Doug Parker and his management team haven't exactly proved pros in the merger arena. By their own admission, the effort to mesh the US Airways and America West reservation systems was a massive fiasco last year. And America West and US Airways pilots still are trying to settle seniority issues years after the merger was formalized. On top of everything else, the US Airways route system wouldn't prove much help to United. US Airways has no presence in Latin America or Asia. It does have a major presence in the Northeast, but that is where airport delays are the worst.
So with Continental out of the picture, Tilton must decide: Can United get by without a merger partner? Or will Tilton take his chances with a last-ditch candidate like US Airways? Either way, the going is sure to be rough.
