Tying in from yesterday’s post, airlines are looking for ways to avert the effects caused by the surge in oil prices. However these aims have forced extreme confusion on the merger between major airlines US Airways and United Airlines. The costs of a merger extend far beyond the problems of partnership. While it may help the corporations at large, and I emphasize may, there is no real guarantee of any success in the deal.
As Susan Carey of the Wall Street Journal reports in her article today, “Rep. Jim Oberstar, the Minnesota Democrat who is chairman of the House Committee on Transportation and Infrastructure, opposes big airline mergers for many reasons. Among them, he said at a hearing this week, are ‘financial problems that could lead to failure in an economic downturn.'”
The dangers of this kind of merger could run as a detriment to the industry, which has a history of touch and go prosperity. However, worse results could ensue from such a deal. Carey states,
“Even if United and US Airways agreed on all the deal terms and their boards approved a combination, a merger announcement could spark a labor backlash if unions foresee downsizing and job losses or aren’t awarded raises. The proposal could face regulatory hurdles like the ones that caused the Justice Department in 2001 to disapprove a merger of the same pair. Mergers bring enormous integration costs, and these days, with airlines hemorrhaging money, preserving liquidity is becoming paramount.”
Moral Capitalism acknowledges that finding alternative resources is paramount. In order for our corporate economy to stay strong, its success will depend on this endeavor. However, companies should look to find these alternatives to succeed individually. Rather it seems companies like these airlines are looking to cover themselves through mergers in order to solve their crisis. In the end, layoffs cut jobs as merger integration costs rise and call for saving funds.
While a few may profit handsomely from such a deal, the business overall will likely do little better; certainly it will be no more capable of solving the bigger issue: sustainability. Human Capital must come first – in order for a corporation to seek sustainable growth, it needs man (or woman) power to support its endeavors.