Dealing with Integration Issues in Southwest’s AirTran Acquisition
Southwest Airlines is moving beyond its strategy of organic growth with its acquisition of AirTran. It went as far as it could go with the strategic model that it first sketched out in 1970 and needed to consider the kind of changes that would allow it to move to its next stage of development. This major shift in strategy will soon enable its customers to stay on Southwest aircraft to travel on Southwest to major airports across the US. It also means that Southwest will now compete more broadly and directly with legacy carriers in the US as well as the Caribbean, anywhere and everywhere, as it becomes a significantly fully national and international carrier.
The M&A media and reviewers universally focus on a certain array of factors that have to be worked out in the acquisition and its integration, including :
- Southwest is faced with adding 8,000 new faces to its 33,000 current employees.
- It must bring two cultures together
- Southwest has to deal with always difficult union/non-union, seniority and wage differential issues, all of which must take place while its keeps its planes flying. Further, one of Southwest’s great strengths is that is has a personnel policy based on hiring for attitude and training from skills. Will it have to revamp that approach with very sizable influx of new staff at all levels of the organization.
- Southwest must deal with moving from a business model based that is keyed on 1) fast turnarounds at smaller, regional airports and 2) using a single model of aircraft.
Looking at Southwest’s challenge from a different perspective that centers on developing a set of core integration capabilities would yield a significantly better outcome. This core integration capabilities approach takes the concerns raised by analysts as real but deals with them as related concerns that are part of the overall integration process. Developing this set of core integration capabilities supports the integration in every phase and aspect of the acquisition process in a way that actually enhances Southwest’s ability to deal with these thorny issues, such as seniority of flight officers. It needs to be noted that these are issues that no other airline has, as yet, successfully resolved.
There are six core integration capabilities that Southwest needs to bring to bear to achieve unprecedented gains from this acquisition. These are all capabilities that already exist in varying degrees at Southwest and Air Tran as well and now need to be seen from the perspective of the acquisition.
1. Strategic agility: Southwest has shown the ability to create strategies and shape action plans that take advantage of market opportunities and strengths. This is not a one-time action since that strategy has to be continuously renewed with every significant change of circumstances. One framework for instilling strategic agility is to adopt the rapid prototyping model described in the January 2010 issue of the Beyond the Deal Newsletter (www.beyondthedeal.net/Newsletter.html). Also draw on the Beyond the Deal book for extensive discussions of strategic agility as well as the other five core integration capabilities.
2. Market agility: Southwest needs to be able to respond to the changing dynamics of the marketplace and uncover new possibilities to serve customers. The opportunities created by the acquisition are huge if Southwest can keep to its core values and present a viable and enriched value proposition to customers in comparison to what its competition (other legacy carriers) offer.
3. Organization building: Southwest needs to build on its current capabilities to be able to nurture the right culture, implement the right leadership principles, build trust, forge robust processes, and incentivize the engagement of those involved in the company.
4. People management: Southwest needs to draw on and enhance its tradition of recognizing talent, building on strength, select people quickly and make sure that people are placed at the right level of challenge, neither underestimating nor overestimating their abilities.
5. Project and process management: Southwest needs to put the right integration plan in place and to implement that plan effectively.
6. Knowledge management, learning and innovating: Southwest needs to be able to share knowledge throughout the newly combined company to ensure that rapid learning and deep, experience-based knowledge continually sharpen its acquisition and integration practices.
The acquisition is a unique window of opportunity to bring about significant change. One comment was that the challenge to Southwest in this acquisition is that it remain “Southwest”. When done well, growth does not mean losing what is of value, but transforming it at a higher level, with a more powerful set of offerings, opportunities and direction. We will continue to follow how well Southwest is taking advantage of this major acquisition as an opportunity to dynamically renews itself, while preserving its essence, which has been carefully cultivated at Southwest since its beginnings.
Follow Us!