Wednesday, April 16, 2008

Continental responds to merger news

Back in February, we talked about the potential impact of a Delta-Northwest merger on Continental Airlines. All three carriers are members of SkyTeam, and presumably "the New Delta" will remain that way even after its merger is approved(1).

Continental, meanwhile, has indicated that it wants to stay independent for acknowledges that it would need to react to a changing market. The going theory is that the Delta-Northwest merger will prompt a similar union between the third SkyTeam carrier and another airline, and the most likely candidate is United Airlines. Since United is one of two U.S. members of the Star Alliance (the other being U.S. Airways), the result of a Continental-United Merger--a "New United," if you will, since indications are that the United name would be retained in such a deal--would likely keep the Star Alliance affiliation.

As frequent flyers, and especially as international travelers, we should care! SkyTeam affiliation gives us earning reciprocity and lounge access with a certain group of carriers, including Air France, Alitalia, and Korean Air. Star Alliance affiliation would change that group entirely, replacing these with Singapore Airlines, ANA, and Lufthansa (among others). There are also fundamental differences in service--not just seat types and plane colors, but the focus placed of taking care of customers as well as how the upgrade processes work--between United and Continental. Simply put, United is not as friendly or service-oriented.

Does that mean that a potential Continental-United merger should be feared? No, not really: scuttlebutt is that Wall Street prefers Continental's management team and track record, so if Larry Kellner and his team were to head up a "New United," there's a good chance that we'd see an expansion of Continental's famed customer service across the broader combined network. That's a best-case scenario.

In the meantime, though, Continental--which posted a profit of more than $500 million last year and overfunded its pension plan at a time when most legacy carriers have simply dumped the plans in bankruptcy court--understands that its passengers are concerned. To that end, the airline has actually launched a Web site dedicated to keeping people informed (the only one of its kind as of today).

True, we can only watch and wait. But at least Continental is giving us a place to look.

Oh, and in the meantime, you New York travelers can now use OnePass miles to start your award trip with a time-saving flight from the City to Newark-Liberty Airport, courtesy of U.S. Helicopter. The 8-minute trip goes for 20,000 miles.

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(1) The Delta-Northwest merger is still subject to shareholder approval as well as the approval of U.S. regulators. That being said, shareholders have been clamoring for this deal, and it's unlikely that the SEC will block it on anti-competitive grounds when fuel is at $120 a barrel and four airlines have been driven into bankruptcy in the last thirty days. Until I hear otherwise, I'll assume that "the New Delta" is happening.

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