This is the trouble. Merit systems, especially for redundancies, are subject to management perceptions of employees, which can be inaccurate, never mind subject to wilful cronyism and nepotism - I saw so many FOs in one loco company working days off doing admin tasks to curry favour promotion that it made my stomach turn. I completely accept those points from the upholders of seniority.
However, since the worst case of redundancies was brought up, and how LILO would be fairest, let me counter it by asking how it's fairer that a senior Captain with an old and healthy final salary pension and kids who have long since flown the nest and a large house with no mortgage is more deserving than a younger one with a crap modern pension, hefty mortgage and a young family depending on him/her?
Seniority is fundamentally wrong. It is institutionalised corruption and bullying. Merit based systems are theoretically fairer, but the real problem is getting them to be objective and not subjective. As raised by others, TREs can be highly subjective on LPCs and line checks, and managers even more so in their reports and files. This leaves the most professional of pilots, who do the right things for the right reasons contrary to the company's wishes, very exposed to abuse. So, the question becomes "how do we create an assessment system which is high in integrity?"