United's Note to US Airways: Mergers Can Be Ugly

"The biggest disappointment from my perspective was the revenue 'dis-synergies,' " said Jim Compton, chief operating officer. Lost revenue cost United "one or two points in RASM that we underperformed," he said. During the year, Delta PRASM rose 7%, AMR PRASM rose 5.8%, and US Airways PRASM rose 3.9%.

One final metric: Instead of a targeted goal of a 10% return on invested capital, United came in at 8%, executives said.

This year, several analysts are recommending United, saying the problems have passed. But S&P Capital IQ analyst Jim Corridore retained a hold on the shares. "We see improvement this year and expect UAL to narrow the gap between itself and peers on revenue performance," Corridore wrote Thursday, in a note. But, he said, "UAL's ongoing integration challenges keep us cautious on the shares, despite our positive view on the overall U.S. airline industry." Corridore has a price target of $26. Shares closed Thursday at $25.54.

One factor in 2013 expectations is that costs will rise due to improved labor contracts, some already signed and some still being negotiated. Rainey said United's 2013 cost per available seat mile, excluding fuel and special items, will rise between 4.5% and 5.5% this year, with 2.5 points of that related to new labor agreements, including a pilot contract that eliminated some of the concessions made during United's bankruptcy. Rainey called that a "mark to market adjustment."

At the moment, US Airways pilots are voting on a memorandum of understanding that would temporarily do the same thing, bringing their wages to American levels. A longer-term contract would follow.

It is worth recalling that the Delta and US Airways mergers encountered early problems. Delta, for instance, had the worst on-time record among major carriers in 2010. Delta shares, which traded near $11 when the merger was announced in April 2008, spent almost all of 2009 trading in the single-digits and fell as low as $3.51 in March 2009. Analysts kept saying, "They need more time."

As for the America West/US Airways merger, it started out well as route consolidation produced sharply higher RASM. But in 2007 US Airways' on-time performance was the worst in the industry, largely because of a March 2007 computer meltdown resulting from the effort to merge two computer systems. Also, the failure to successfully complete pilot seniority integration has been a lingering embarrassment, one that could resurface as US Airways and American pilots seek to merge their seniority lists.