United and Continental Merger

United and Continental Merger

There’s little doubt that mergers have been a topic of interest in the airline industry over the past 75 years, but no more active than in the past five years.

With historical mergers coming on the heels of flailing airlines–TWA, US Airways and America West, the recent merger of Northwest and Delta seemed to put the idea back in the minds of many. As you no doubt know, Continental Airlines and United Airlines have plans to merge and the new combined airline will be called United Airlines and use the Continental logo and colors.

The new United Airlines will surpass Delta Air Lines as the world’s largest carrier and serve 370 destinations in 59 countries. The combined frequent flyer program would also be the largest in the world with over 90 million members.

If the merger receives approval by shareholders and government regulatory agencies, it is expected to be complete near the end of 2010. Both airlines and frequent flyer programs will operate independently until then. Mileage Plus and OnePass members can continue to earn and redeem miles in either program until the merger closes and “the new frequent flyer program will blend valuable features of OnePass and Mileage Plus from United and Continental,” according to the merger Web site.Members can continue to earn miles with the Mileage Plus credit and debit cards or Continental OnePass credit and debit cards. Visit http://www.unitedcontinentalmerger.com to read the latest news from the merger.

Bottom line: But this is not the done deal that many would think. Representative Jim Oberstar, chairman of the powerful House Transportation Committee, has taken aim at the proposed merger between United Airlines and Continental Airlines, saying their union into what would become the world’s largest airline would lead to less service, higher fares and pressures on other airlines to merge just to keep up.

And that might just be the key … “pressures on other airlines to merge just to keep up.” After all, that is what this latest airline envy announcement from Continental and United seems to indicate. It has been quite awhile that we’ve seen a merger of two strong airlines. Continental’s financial performance seems to indicate they are as well run and financed as any airline in the sky. And while United has floundered with their bankruptcy, name another airline recently that has shown United’s ability to clean up a bottom line.

Government officials will certainly focus on the idea that this country’s air service would be dominated by three “mega-airlines”–the new United, American and Delta. The assumption being that American would scurry to gobble up US Airways, but there are other options that are not being talked about. While ultimately it is up to Department of Justice officials who must decide whether to approve the merger or decide to contest it in court, it certainly would not be a surprise if this continues to be a topic for many issues to come of this magazine.

But let’s assume there is a merger. The mere announcement that it would have the United name but carry the Continental branding of colors, typeface and logo seems to be a real confusing decision. Never in any of the past mergers has it been a merger of interests–mergers have always resulted in a single airline identity. There certainly was no chatter whether Delta was considering using the “WorldPerks” frequent flyer name for the combined airline. And WorldClubs? Well, let’s just say that you’ll be welcome in today’s Delta SkyClub.

But again, because of what the new United might be, could we see United OnePass? United President’s Club airport lounges? Our guess is that this is all on the table for discussion and likely to go back and forth as many times as it takes for one of the airline executives to finally end the filibuster.

Advice from InsideFlyer–go with United. The strength of the long term brand of Mileage Plus is undeniable, it has the longer history with the Star Alliance, the larger portfolio of credit card products, the largest partner network for distribution of miles, the largest mileage mall and it has the larger base membership for its frequent flyer program. No one loves the history of OnePass more than us, as none of the current executives were in place when we originally started to follow that frequent flyer program. But it’s okay, once we merge the miles into a single account, we’ll still be happy if United will offer those BusinessFirst upgrades!

A key to this proposed merger is the precedent that was set by the Delta-Northwest merger that ceding a few flights to other carriers can override objections about the size of a merged air carrier. Somewhere in Chicago and Houston, there is a list of flights the two airlines would be willing to abort for the takeoff of this merger.

Leave a Reply

Your email address will not be published. Required fields are marked *