Browsing Posts in Mergers/Finance

I’m not quite sure how this was decided, but yesterday was “Customer Day One” for the combined Continental and United.. That doesn’t really make sense to me, because not much actually seemed to Customer Day One at the New Unitedchange and there’s plenty of work left to do. Let’s review where we stand.

Better Website Integration
Work has apparently been done which will allow customers on either the Continental or United website to shop for flights and check flight status on each other’s website. This, of course, is a temporary fix until there is only one website. I would think the day that one website is used is closer to being “day one” of the merged airline than this.

Renaming Elite Benefits to Premier Access
Just as Delta has done with Sky Priority, United is putting its suite of elite/premium cabin benefits under the name Premier Access. I suppose that means the new United will be keeping the “Premier” terminology used by the old United for its elite program, but the offerings don’t seem to be much different than what elites got before – just a different name. They’ll still get priority check-in, priority security, priority boarding, and priority baggage handling. I’m not sure if the last one is a new benefit, but in general, this is mostly a branding move. But there’s a catch.

Premier Access will become available to elite travelers at all of our airports over the next several months. In airports where Premier Access is not yet in place, eligible customers have access to United’s premium airport services and Continental’s EliteAccess benefits.

So this really isn’t available throughout the system and it’s going to take months.

Mileage Plus and OnePass Grow Closer
It’s being announced now that members in both programs can move miles back and forth at will and elite members will receive similar treatment. This has been out there for awhile, I believe. It’s also another temporary step until there is a single mileage program later this year if not beyond.

Check-in Times and Boarding Are Standardized
Check-in times should now be standardized throughout the two airlines, and boarding is as well. (There are a bunch of other policies that have been standardized as well.) The Continental boarding method which gives priority to military members, then elites/premium passengers, and lastly families has won the day. The rest of the boarding process will be be rows starting in the back. There appears to be some standardized lounge benefits as well including free wifi and booze, but I think that happened months ago.

Standardized Food, Sort Of
Meals (including buy-on-board) will now be the same regardless of whether you’re flying Continental or United. But not everything is perfect right now. Beverages won’t be standardized until the end of the summer. But you coffee drinkers can rejoice. Get ready for “a flavorful new custom blend.” Whew, and here I was worried it would be flavorless.

New Airport Branding
Yesterday, the signage for the new United went up at Chicago/O’Hare. (I wonder if they caught the ages old logo in the tunnel on the way to the El.) The tulip is dead, but it’s only dead in Chicago. San Francisco and Washington/Dulles are next, and the rest will take months. So, the Chicago people can see some real change but elsewhere, not yet.

Twitter and Facebook Join the Merger
Separate Twitter accounts and Facebook pages are gone. Now it’s just @United on Twitter (much better than the character-wasting @UnitedAirlines that was previously used). And there’s a new Facebook page as well.

So that’s customer day one? It just seems like another day of progress along the road, but it’s not a major change for most people. I’m not trying to diminish the number of changes made so far. It’s a daunting task that is very difficult, but I have no clue why they’re calling it Customer Day One with so much more to do.

Southwest, AirTran merger may mean changes for Northeast Ohio airportsWKSU
I spoke with an Ohio public radio affiliate about the impact of the Southwest/AirTran merger on the region. (This should have been included last week, but I missed it.)

Frequent flier’s tips for dealing with jet lagCNN Out of the Office
I had some challenging travel this week from a body clock perspective, so I shared some of my tips for helping with jetlag. Nothing works really well for me, but this isn’t bad.

In the Trenches: How to Stop Working So MuchIntuit Small Business Blog
It’s hard enough working at home, but if you aren’t careful, you’ll never stop working.

Frequent Flier FactsWoman Road Warrior
I sat down to discuss my thoughts on elite programs and whether they’re worth it. This was a piece more for those who don’t know a lot about the world of elite status.

The Department of Justice approved the Southwest/AirTran merger without any changes this week. The DOJ said it had no concerns about an anti-competitive impact from the merger. Do you agree? Are you surprised that it sailed through?

I spent last week at two of my favorite events – US Airways Media Day and the Phoenix Aviation Symposium. As usual, one or two big headlines will come out of these things, and they’re usually reported incorrectly. This year was no exception. So let’s talk about US Airways and why it won’t actually be merging anytime soon despite some misguided stories.

US Airways Dating Game

Many outlets picked up on the fact that US Airways CEO Doug Parker once again spoke about how the airline believes that eventually the legacy carrier world will come down to three main players – American, Delta, and United. And again, Doug mentioned how US Airways could merge with any of these at some point. That’s not a surprise. He’s been saying this for years. But apparently there’s enough turnover in the people covering the airline industry that some treat this as if it’s actually some kind of news. Take a look at Shira Ovide at the Wall Street Journal, for example:

Doug Parker is flagging he’s more than willing to break out the “for sale” sign on his lawn. It’s also a sign that US Air, which combined with Parker’s then company — America West — more than five years ago, didn’t get the kind of scale it wanted from that deal.

*sigh* That “for sale” sign has been out there for a long time, and it shouldn’t come as a surprise to anyone who has even remotely paid attention to this industry. But the chance of a merger happening anytime soon is slim at best. There simply isn’t a good opportunity for US Airways with any of those three right now.

American
Let’s start with the one that everyone points to . . . American. Since Northwest and Delta linked up as did United and Continental, that means US Airways and American will as well, right? Wrong. It would be a disaster of epic proportions if American tried to merge with US Airways now.

US Airways is never shy about pointing out how it survives as an airline. Its hubs are in less desirable locations than the big three airlines and that means it is able to generate less revenue from them. How does it compensate? It has lower costs than the big three to offset the revenue deficiency. That’s how the math comes together. If American buys US Airways, it buys a route system that doesn’t generate enough revenue to cover American’s costs, but American would naturally bring US Airways costs up to its level. That is bad.

I can only think of two ways this works. One would involve American buying US Airways and running it as a separate airline under a holding company. This would not only be a wasteful distraction for American but it might not work. If the feds decide that the airlines have single carrier status (just as Republic/Frontier/Lynx/Shuttle America/Chautauqua just received) then it would mean a single workforce and costs would start to rise. American would also get little benefit. If it really wanted this kind of benefit, it would be better off just agreeing to a codeshare.

The other way is more plausible. If American continues its downward slide and ends up in bankruptcy, I would look for a US Airways bid just as it did with Delta. Then US Airways could rework American before it took it out of bankruptcy and come out with a highly competitive airline. Right now, this is the only plausible merger scenario I see, but American isn’t going into bankruptcy anytime soon.

Delta
The Delta/Northwest merger went so smoothly that some wonder if the airline could handle another one? I imagine it probably could, if it so chose, but there are too many problems and not enough benefit. Forget about the cost issue and look at the route overlap. The feds are unlikely to allow Delta to control Atlanta and Charlotte – the only two viable hubs in the southeast US. Also, the feds were so concerned about the US Airways/Delta slot swap because it would concentrate power in Washington and New York that they blocked it. Just imagine how concentrated the power would be if the two merged. In addition, Phoenix and Salt Lake would only work to hurt each other in the same airline. This would simply be about eliminating competition and nothing else. I just don’t see it happening now.

United
These guys are so tied up with the Continental merger right now that I can’t imagine them being interested in taking on something further. Besides, how do you think the feds would look at a Newark/Philly/Dulles hubbing situation? And there are a bunch of cities in the west where US Airways and United provide the only two options (e.g. Yuma, San Luis Obispo). There could be plenty of concern in the near term.

But overall, the cost issue is going to be the biggest one for any of these airlines. Does that mean that a merger can’t happen? Of course not. There have been plenty of stupid airline mergers of the years. But the chance of one happening anytime soon is remote, and that’s being optimistic. Down the line, things can always change, so will US Airways be around in 5 years? That one is much harder to predict.

Yesterday, the new United continued tweaking its offerings with three announcements on Mexico, China, and frequent flier reciprocity. While I’m sure there are going to be a few big announcements over the next few months, I imagine we’ll see a lot more small ones like these as the two airlines march toward one. I’m certainly not planning to write about these things every time they happen, but I thought yesterday’s were particularly interesting.

More Mexico
One of the announcements was a compilation of a bunch of moves being made in Mexico, some done before the merger and some new. Here’s what’sUnited Expands Mexico happening.

  • LAX to Leon daily on a Continental 737-500
  • Cancun to Austin, San Antonio, and Raleigh/Durham Saturday-only during winter season on Continental 737-700s
  • LAX to Mexico City goes from daily to three times daily on United
  • Chicago to Mexico City goes from Saturday-only to twice daily on United
  • San Francisco to Mexico City goes from daily to twice daily on United
  • Denver to Mexico City new daily service during the winter holiday season

One of these stands out like a sore thumb. I mean, Raleigh/Durham to Cancun? Delta is already flying that as a Saturday-only service, so is there really enough demand for two? There has to be something behind the scenes there. But the rest make a lot of sense on the surface.

All the Mexico City flying is a result of the perfect storm. When Mexicana shut down, it left a vacuum for more flights between Mexico and the US. But then the FAA declared Mexico a Category 2 country which meant that Mexican carriers could no longer add service until the country fixes the problem. That left huge opportunity for US carriers, and most of them have been beefing up service to fill the void.

I also really like the LAX-Leon flight. I could never figure out why United refused to look at more LAX-Mexico flying, but if anyone can do it, it’s Continental. This has to be the brainchild of the Continental guys, and I imagine we’ll see more like it. At least, I hope that’s the case.

Fighting American in Shanghai
Glad to see the stiff competition between United and American hasn’t disappeared with the Continental merger. It’s just moved to China. For years, China Eastern has been the only airline flying LAX to Shanghai nonstop. American has had its code on that flight for a long time as well. But now China Eastern is going to join SkyTeamUnited American Fight and Delta will be the airline’s US-based partner. So American had to decide what to do. It apparently saw enough opportunity on the route to apply for service on its own. The DOT approved the application almost instantly.

But now, United isn’t happy about that and has applied for service itself. Great, what a waste. There was nothing stopping United from asking for this before, but it’s like the little kid that wants what his brother has. This flight would not only divert connections from the current San Francisco flight, but it would also flood the market with a lot of seats, if approved. (Is there even another frequency available in the bilateral agreement?) Either way, I don’t like this move.

Economy Plus for All
Lastly, OnePass and MileagePlus got even closer by implementing further reciprocal benefits for elite members in both programs. As of now, Continental elites can sit in Economy Plus on United and United elites can sit in the preferred seats on Continental. They can also get upgrades on either airline. In other words, it really doesn’t matter which program you’re in at this point. The benefits are virtually identical, though the final merger into a single program won’t come until next year sometime.

[Original photos via Rep Gingrey and Flickr user *clairity*]


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