UPDATE (April 27th): Continental announces that they won't merge with anyone! Read The Flying Critic's analysis and commentary on what United needs to do next.
Merger Rumors
The New York Times reports that Continental and United are said to be close to announcing a merger:
United Airlines and Continental Airlines are getting closer to a merger agreement and would like to wrap up a deal by the end of next week, people with direct knowledge of the discussions said Friday.
Earlier today I heard rumors that UA and US were talking - but they were not from any reliable sources. This report by the New York Times carries more weight.
Continental and United have been involved in substantial discussions for months. I hoped that both companies would realize they are not a great match for each other. It is an understatement to say that their corporate cultures and strategy differ. Total opposites maybe.
A Poor Match For Each Other
United flys 3 cabin international but Continental flys 2. United has economy plus (several extra inches of legroom for frequent flyers and those who pay extra). Continental doesn't. Their frequent flyer schemes are also incompatible. Continental is stingy with miles and awards and United is generous. Continental provides free unlimited domestic upgrades. United requires vouchers for upgrades. United offers free international upgrades and Continental doesn't. I prefer United over Continental because of these differences. Many people prefer Continental for these same differences.
Yet many flyers I talk to are excited about a Continental and United merger. They see it as merging the two best domestic airlines. Ideal, right? They imagine a merger utopia where the new airline combines the best features of each airline: economy plus, 3 cabin service, lots of free international upgrades, free booze in the lounges, consistent service, affordable first class prices, meals in coach, free domestic upgrades, more extensive route network, easy mileage award redemption, engaged management, good labor relations and more!
Frequent Flyer Perks And Operations Must Change
There is no way the new company can afford to offer the best of both airlines and be competitive in the current environment. The new management - likely to be most of Continental's current team - will have to decide what features to keep and what to toss.
Because of the
incompatible differences between United and Continental's current programs there are certain to be many frustrated frequent flyers whose perks will be changing with the new merged airline.
If the new United/Continental removes too many benefits and features that their prior customers want those customers may decide to look at alternatives. And unfortunately for United/Continental, American and the new Delta will both look like good alternatives. Routes aside, the new Delta features benefits similar to the old Continental and American similar to the old United. This will make the new management's decision about which perks to keep and which to drop critical.
No Merger Fan Here
I'm not a fan of United/Continental merging. The culture differences will be maddening to all involved. If mergers have to happen, and I'm not convinced they do, I'd rather see UA/AA (with some trimming and immediate grounding of the fuel-hogging MD80s) and CO/AS (buying the leftovers from UA/AA).
Unfortunately it sounds like UA/CO is set. Assuming for a moment that it is, what will the fall out be for frequent flyers? There isn't any practical way for the new management to make everyone happy. Only time will tell how bad it will be for the customers.
How The Flying Critic Would Advise The New Management Team
They need to find a way to provide enough benefits to keep customers loyal and happy but they also have to deal with the current and future cost environment. If they hired me to advise them on the impossible decisions that matter most to frequent flyers I would suggest that the new company:
- Drop 3 cabin first class and adopt the 2 cabin BusinessFirst approach used by Continental
- Abandon Ted
- Keep Economy Plus and add it to the Continental planes
- Add first and Economy Plus to all regional jet
- Adopt Mileage Plus over OnePass (but with changes noted below)
- Keep the international system wide upgrade scheme from United for top tier frequent flyers but add a variable cash co-pay based on fare class
- Change the Red Carpet Clubs to be like Continental's President's Clubs
- Make top tier (1K/Platinum) require 125,000 miles
- Adopt free domestic elite upgrades like Continental's current system over the e500s upgrade coupons used by United
- Keep the confirmed region 1 upgrades that United gives to top tier frequent flyers but add a variable cash co-pay based on fare class
- Add variable co-pays based on fare class for mileage upgrades
- Abandon the elite boarding process of United (where 1K/GS/First/Business board before other elites) and allow elites of any level to pre-board like on Continental
- Fire United's web team and keep Continental's
- Stop providing Continental's free coach meals but start providing more substantial (and expensive) buy on board meal options
Not happy with my proposals? Unfortunately, my bet is that the real changes will be worse. I hope I'm wrong.
If the new management asked you for help what would you advise?
