Monday, April 04, 2016

On Culture and Acquisitions

Alaska Airlines is buying Virgin America for $4B. "Alaska Air Group has agreed to buy Virgin America for $2.6 billion, the airlines said. Alaska Air (ALK) said it will pay $57 per share, sending Virgin America (VA) stock soaring 40%. Including debt and aircraft leases, the transaction is worth about $4 billion." [CNN]

Airlines have consolidated more in the last 4 years than telecom has. But both are similar.

"The combined airline will have 1,200 daily departures, 280 aircraft, and hubs in Seattle, San Francisco, Los Angeles, Anchorage, Alaska, and Portland, Oregon." [CNN] This sounds like telecom. 1200 miles of fiber, 280 CO's, and POPs in 4 cities. Sounds like every telecom merger too.

It is all about inorganic growth. It is far easier to buy growth than attain it. Don't these companies ever wonder why that is?

Do airlines know that they are airlines? They SUCK! How many happy customers do they actually have? The seats get smaller and smaller. Legroom is gone. Bathrooms are being ripped out to add more seats. By all accounts, travelers loved Virgin and disliked Alaska. Will the acquiring company's culture take over - or will the execs at Alaska Air realize that to get the most value from this purchase, it needs to supplant AA with VA. Again, do the execs at Alaska Air know that the company is disliked?

Allegiant, Spirit, Frontier, American, United, Southwest -- is there a good airline? Maybe Delta. I feel the same way about telco. Is there a good telco with a culture of service? Sure, some smaller ones (sub $100M) and at least one under $1B in rev.

Mostly these acquisitions are about growth for growth. Synergies really mean that we will do more with less people and that payroll expense will go to either pay down debt or buy back stock to prop it up for the execs parachute. Total bullshit.

When Level3 bought TWT, the execs at L3 had the good foresight to keep key TWT people and systems and try to absorb some of that culture. It was their best integration yet.

Airlines and Telecom. Culture and Acquisitions. Growth and Money. We build more companies that people don't want to deal with - as customers or employees - unless they have no choice.


No comments: