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"Success of airline merger plans may rest on strong personalities"


 
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Monday, December 18, 2006

Success of airline merger plans may rest on strong personalities

Pilots and employees of Delta Air Lines gather at the Georgia International Convention Center in Atlanta last week to protest the hostile takeover proposed by US Airways.
Pilots and employees of Delta Air Lines gather at the Georgia International Convention Center in Atlanta last week to protest the hostile takeover proposed by US Airways.

CHICAGO -- When Gerald Grinstein retires as chief executive of Delta Air Lines, he may not want to be remembered as the man who surrendered the number three US carrier to the brazen, young management team at US Airways Group.

Grinstein, 74, has said he plans to retire after Delta exits bankruptcy -- and he knows his legacy at Delta is riding on what he does over the next few months. He has made clear his opposition to a hostile $8.6 billion takeover bid by US Airways.

Experts say mergers can often be a difficult experience for executives struggling to retain power or simply remain relevant at companies they spent many years helping to build or run. In the aviation profession, these leaders may simply want to stand out in a field that's had its share of luminaries.

"Egos, innovation and high finance. A potentially valuable, but most often disappointing combination," said airline consultant Robert Mann said.

Grinstein's opposition to a takeover may be partly rooted in this kind of internal conflict, experts say, without judging the wisdom of his position.

"Grinstein's got a legacy management problem. He doesn't want his legacy to be the guy who sold Delta Air Lines," said Stuart Klaskin with KKC Aviation Consulting.

Meanwhile, US Airways, under the leadership of 45-year-old Doug Parker, is appealing directly to Delta's creditors to force Grinstein, who was chief executive of Western Airlines when it merged with Delta in 1987, to reconsider his plan that Parker claims could save the combined airline $1.65 billion a year.

Some aviation business experts say part of Parker's agenda may be to cement his own legacy as the CEO who led the overall consolidation of the airline industry.

Aside from US Airways' bid for Delta, UAL Corp., parent of United Airlines, is in merger talks with Continental Airlines, raising the question of who would lead that company: UAL's Glenn Tilton or Continental's Larry Kellner.

"Basically one side is in there negotiating their jobs away," said Darryl Jenkins, an independent airline consultant.

Speculation also swirls around bankrupt Northwest Airlines as a possible takeover target for AMR Corp.'s American Airlines.


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