US Air

Case study: organizational merger problems of US Air

You may read the case here: 3.1 US Air

How did different organizational structures create problems in the merger?

The two old airlines had extremely different organizational cultures. The old US Airways had an older workforce with highly structured bureaucracy, and the IT management was outsourced to EDS. In contrast, America West had a much younger workforce with an entrepreneurial culture, and an in-house IT department. In addition, key information systems used by the two airlines also differed. During past financial difficulties, the old US Airways laid off thousands of employees. On the other hand, America West protected employees and sought aids from vendors and the government.

Unresolved seniority issues led to nightmares in rescheduling shifts and routes. The crew could not be switched because a joint contract had not been signed, and crew rankings had not been finalized.

 

What steps did the new US Airways take to reduce these problems?

Due to the IT department problem, rather than choosing one or the other approach, the new company decided to take a hybrid approach by outsourcing some work and insourcing others. But this added to even more difficulties.

Due to the information system differentiation problem, new US Airways decided to switch over from its own system SABRE to the SHARES system that America West uses. Given the millions of transactions per year, integrating the two systems is not easy, especially when they both must continue to operate in real-time during the integration process. The result is, out of 7 million reservations transferred to the new system, about 1.5 millions “didn’t sync up” correctly.