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On June 29, United Continental Holdings executive Lori Gobillot’s calendar was jammed with 27 meetings and phone calls, some scheduled simultaneously. That’s pretty typical these days as she oversees almost three dozen teams of managers who—one decision at a time—are stitching together United and Continental to form the world’s largest airline. In technology alone, the carriers, which merged last October, have 1,400 separate systems, programs, and protocols. Workers from the two predecessor airlines are represented by different labor unions and subject to dissimilar work rules. Even the airplanes are mismatched. United’s fleet has first-class cabins; Continental’s planes have just business and coach. United Continental has told Wall Street that it can find $1.2 billion in new revenue and cost savings from the marriage within three years. That can only come from rationalizing operations and removing redundancies—and fast. So the pressure is on Gobillot, vice-president of integration management. “It’s such a complex, stressful, difficult experience,” she says. “But once you’re finished, you have exactly the house you want.”
The resulting megacarrier will ferry passengers between 373 airports in 63 countries, with major connecting hubs in New York, Chicago, Houston, San Francisco, Washington, Los Angeles, and Tokyo. United Continental is betting that its huge list of destinations—and a frequent-flier program that has more members than France has citizens—will lure high-paying business travelers from Delta Air Lines and American Airlines. The carrier’s sheer heft also suits an industry where economies of scale favor the big. Simply shaving a half-cent off United Continental’s per-mile operating costs would have boosted first quarter operating results by about $260 million.
Still, plenty of past airline mergers have hit turbulence that cut into hoped-for savings. Pilots and flight attendants at US Airways Group, a combination of US Airways and America West, are still operating under separate contracts with different pay rates, schedules, and work rules—almost six years after the merger. And Delta Air Lines remains bogged down in a labor dispute that’s kept it from equalizing pay and work rules for flight attendants and ramp workers at Delta and Northwest Airlines, which it bought in 2008. That’s why United Continental execs are so focused on the minutiae of the integration. “The guiding principle is: This is our once-in-a-lifetime opportunity. Let’s not blow it,” says Chief Executive Officer Jeffery Smisek.
Smisek is counting on Gobillot, an old colleague from their days at Houston’s Vinson & Elkins law firm, to make it happen. The executive, who turns 50 this month, worked at Continental for a dozen years as assistant general counsel on projects including a venture with online travel agencies Orbitz and Hotwire, and a partnership with Panama’s Copa Airlines. Although this is her first operational job, Gobillot was an obvious choice, having coordinated the carrier’s due diligence with United during failed 2008 merger talks and again leading up to the 2010 deal. She had the foresight to archive the “electronic data room” that allowed the carriers to swap financial information in 2008, which sped the 2010 talks by avoiding a standing start. Gobillot’s 33 interdisciplinary integration teams are making thousands of decisions, ranging from the fastest way to clean 1,260 airplanes and board passengers (should the arms on seats be up or down?) to which perks to offer in the frequent-flier program.
Immediately after the merger was finalized, Gobillot began holding 20-minute powwows with each of the teams, which include personnel from both airlines. Members include managers from technology, labor, fleet management, network planning, and other departments, and are structured around operations, commercial activities such as a credit-card partnership with JPMorgan Chase, and finance. “It was kind of like speed dating,” says Gobillot. The groups quickly agreed to keep first-class seats on United’s international planes because they bring higher fares and are a competitive advantage over rivals such as Delta and Australia’s Qantas Airways, which don’t have them. A last-minute first-class roundtrip from Washington to London is $16,519, double the price of a business-class ticket and 10 times more than a coach fare. The downside is that Continental’s jets don’t have first-class seats, which may confuse some customers and make it difficult to shift equipment around the system.
