What to expect if United and Continental merge

May 03, 2010
Fares from Washington DC:

    Of course, it’s possible that the merger won’t get U.S. Government approval or that employee unions will resist it. Only time will tell if this deal actually takes place. But if the sale is finalized, here’s what might happen:

    Higher fares

    At least in the short term, fares are likely to rise, especially on routes with less competition and the 13 routes flown nonstop between the two airlines’ hubs, such as Newark to Los Angeles, Cleveland to Chicago, Denver to Newark, Houston to Denver, and others. A rising tide of mergers tends to lift all airlines, so even other airlines such as American and US Airways, which haven’t decided to merge with other carriers, will be able to raise fares as well. However, it’s highly likely that low fare airlines such as Airtran, JetBlue, Virgin America, Southwest, and Allegiant will see opportunity in these increased fares, and expand service on routes where fares have increased. It’s also possible that entrepreneurs will launch yet another discount airline, keeping a lid on fares.

    Other mergers

    Now that Delta and Northwest have merged, as have US Airways and America West, and Frontier with Midwest, we could see other large and smaller airlines contemplate combinations. It’s impossible to predict which airlines might combine, but anything is possible: American and US Airways? American and JetBlue? Airtran and US Airways? It’s anyone’s guess, but it’s likely that the United/Continental merger will not be the last we’ll see this decade.

    More and higher fees

    Since United has slightly different fees for some services than Continental does, it’s likely that any higher fees on United will be adopted on routes flown by Continental, as happened when Delta merged with lower-fee Northwest. And existing fees could increase, since the less choice that consumers have, the fewer opportunities they have to fly on airlines with lower fees.

    Frequent flyer programs

    Miles held in United’s MileagePlus program will be combined with those in Continental’s OnePass program. This might be advantageous for consumers who don’t have enough in either program to fly for free if by combining miles they end up with enough for a free flight.  Most likely, United’s program rules will survive the merger when there any differences in the rules of the two airlines’ programs. For example, Continental OnePass miles currently don't automatically expire if there's no activity in an account, whereas United's expire after 18 months of inactivity.

    United’s premium economy seating

    United’s popular “economy plus” seating, which provides extra leg room for various additional fees, will most likely be extended to Continental’s fleet.

    Fewer hubs

    A United/Continental merger will result in hub airports in Chicago, Cleveland, Denver, Houston, Los Angeles, Newark, San Francisco, and Washington Dulles. It’s unlikely that the combined airline would maintain all of these hubs, so one would expect to see a reduction in service at some of them. Cleveland would definitely see less service.

    A healthier airline industry?

    Many observers believe that there are too many airlines in the U.S., and that consolidation is necessary to end the cycle of airline bankruptcies and a decade or more of red ink, which has resulted in a poor service and deteriorating employee morale. Consolidation might have a silver lining if it results in a stronger U.S. airline industry providing a more reliable, customer-focused product.