United Airlines Marries Continental Airlines — For Better or for Worse?
United Airlines CEO Glenn Tilton and Continental Airlines CEO Jeff Smisek smiled and shook hands at press conferences in New York and Chicago as they discussed the $3.2 billion merger that would create the world's largest airline. The merged airline, to be called United, would have 10 hubs in 59 countries serving 370 destinations and 144 million passengers. The merged company, to be based in Chicago, will be called United Continental Holdings, with Smisek as CEO.
Two years ago, Continental walked away from merger talks with United. This time, the deal was made soon after reports of talks between United and U.S. Airways, the nation's Number 6 carrier. Smisek has been quoted as saying: "I recognized that United is the best possible partner for Continental. I didn't want him [United's Tilton] to marry the ugly girl. I wanted him to marry the pretty one, and I'm much prettier."
But how do passengers feel about this marriage?
Writer Laurie Borman, who lives in Chicago, United's headquarters, said: "I fly United and like the airline and the service. They have their own terminal at O'Hare Airport, shared only with Lufthansa, so it's a pretty big operation. My take is that it won't make a lot of difference to the typical passenger here. Code-sharing has already erased some of the exclusiveness of flying any one airline. When you book a flight, half the time you're not flying the airline you booked the flight with."
Continental fans had a different reaction. "I'm not happy," says Yves Gentil, a New York public relations specialist and Platinum Continental customer. I love Continental; I have been flying with them since 1990. I hate travel, but they make it pleasant. I am always treated well and I feel they care about my comfort -- so I fly with them even when the ticket costs more. The few times I've been forced to fly United, the plane was old and the attitude was nasty." Gentil expressed skepticism that he would continue to experience the same Continental treatment by the new United, which will still wear the Continental logo and colors. "I've seen what happens when mergers occur, and I don't think my favorite airline will remain the same." He added: "If American [Airlines] were to call tomorrow and say they would maintain my status, I would have to make the switch."
New Jersey nurse Andrew Hassard expressed similar sentiments. "I shop online to find the best deals when I travel. Continental sometimes costs a little more, but I'm willing to pay because they are reliable and they don't nickel and dime you. The one time I flew United, the attendants were openly rude...who needs that?"
So in which direction will the new, merged carrier go -- nasty or nice? The Houston Chronicle wrote that the new United would face "the challenge of combining two distinct corporate cultures and customer service reputations." The same story quoted an industry analyst as saying: "Let's just hope they adopt Continental's corporate culture. It's dramatically better than United's."
What about ticket prices? Will they go up?
Wall Street likes mergers because they allow airlines to raise fares by reducing the number of flights and seats. However, both CEOs say that the new mega-airline will not have the power to raise prices because there will still be industry competition. "There is no carrier in the world that can set prices," said Smisek. "We couldn't set fares before this. We can't set prices after this." A Continental spokeswoman added: "There has been, and will continue to be, strong competitive pressure on fares. Eighty percent of all domestic markets and 76 percent of all United and Continental domestic markets have access to travel on several other carriers." Antitrust regulators are likely to be watching fares after the merger, so passengers will just have to wait and see if competition and oversight keep prices stable.
And service -- how will that be affected?
Faced with rising fuel costs and a recession, both carriers have been losing money. Both airlines eliminated flights; Continental shrank 5.2 percent, United, 7.4 percent. A United spokesman said: "Today, with the economy beginning to improve, you have two stronger carriers in a stronger environment. Both CEOs say that they are not planning any service cuts and that they are likely to maintain or grow service to meet demands." The Continental spokeswoman said: "This merger will expand customer access and provide more flights to more destinations worldwide. The combined carrier will continue to serve all the communities each carrier currently serves...[with] hubs in the four largest cities in the United States, and will provide enhanced service to underserved small- and medium-sized communities.
"Internationally, the combined company will offer enhanced service to Asia, Europe, Latin America, and the Middle East from well-placed hubs on the East Coast, West Coast, and Southern and Midwestern regions of the U.S."
The United spokesman pointed out that even after the 2008 merger talks collapsed, the two airlines, "even as competitors worked together on activities to align, to create seamless flight connections for passengers. "So they have already had two years of working together.
"As Continental has joined the Star Alliance, there should be more customer benefits because Frequent Flyer miles will get them to more places. And this summer, we will offer upgrades at no charge to both Elite and Premier customers."
The Continental spokeswoman said: "Customers will continue to benefit from the most comprehensive global route network with increased flight options, more connecting opportunities, competitive pricing, additional scheduling flexibility, and access to leading reciprocal frequent flier and airport lounge benefits with Star Alliance's other 24 member airlines around the world. The Continental/United merger will provide synergies and consumer benefits that are not available either as a stand-alone company or through alliances."
She summed up the deal: "Continental is known for its great service and Working Together culture, while United is the more globally recognized name. This is a merger of equals, with the combined company using the United name and featuring the Continental livery and its globe symbol. And of course, this branding extends far beyond the paint on the tails of our airplanes."
Though the merger still requires regulatory and shareholder approval, it is expected to close by the end of the year. Jobs will be lost, offices will close, and routes will merge, presumably to result in greater efficiency and cost-cutting. Will the savings be passed on in any way to passengers? Will the poor souls who endure coach travel see any benefits or comforts? The United spokesman replied: "Tune in and see."