Skip to comments.United, Continental partner up to cut costs
Posted on 06/22/2008 1:38:14 PM PDT by Paleo Conservative
Continental Airlines said Thursday that it will switch global alliances, joining United Airlines in a deal giving customers full access to both carriers' networks while allowing them to earn frequent-flier miles.
The companies described the deal as more than a traditional code-sharing arrangement, saying cooperation on "frequent-flier programs, lounges, facility utilization, information technology and procurement" will boost revenues and cut costs. Shares of both airlines, burdened like their peers by soaring jet-fuel costs, rose sharply Thursday.
Houston-based Continental plans to partner closely with Chicago-based United and join the global Star Alliance, a 20-airline group that includes Lufthansa and Air Canada. Continental will apply with the Department of Justice to join United and several other Star carriers in an antitrust-immunized transatlantic joint venture that pools revenues.
The proposed deal comes after recent merger talks between United and Continental fell through.
United also tried to merge with US Airways, but those discussions failed.
High fuel prices and tight credit markets have made airline mergers, which involve significant investment, less attractive.
"Following the decision by Continental not to merge, we suggested . . . that an alliance partnership . . . would be compelling and allow us to achieve many of the benefits of a merger," United chief executive Glenn Tilton told employees in a recorded message Thursday.
"Customers will be able to take advantage of the benefits of both carriers' frequent-flier programs and airport lounges, and elite customers will enjoy recognition in both programs," he said.
The biggest benefit to United customers may be full access to Continental's route network, which is particularly strong in Latin America.
"If you're a United traveler, you will have access to Continental's international routing," said Robert Polk, co-owner of Polk Majestic Travel Group in Denver. "It will give you pretty much the whole globe."
Continental must first sever ties with the SkyTeam alliance that includes the merging Delta and Northwest airlines, a process that may take months and could be blocked by SkyTeam members. Regulators must also approve.
The deal is unlikely to affect either carrier's flight operations at Denver International Airport, observers said. Partners in code-sharing arrangements typically compete vigorously at their hubs and don't reduce flights, Evergreen aviation consultant Mike Boyd said.
"On the surface they like each other, but underneath they still want to kill each other, and that's good for the consumer," he said.
United is the dominant airline at DIA. Continental leases three gates and flies to Los Angeles, Houston, Cleveland and Newark, N.J.
It operates a lounge on the A concourse, which it shares with Lufthansa, and it owns a maintenance hangar it leases to Frontier Airlines.
The lounge is one asset Continental could shed, Boyd said.
A call to Continental was not returned before press time
If this is prelude to a merger, it’s great news for flyers.
United is the legacy carrier most likely to fold. That’s why they can’t find a merger partner. US Air is closing in on irrelevancy as well.
“Following the decision by Continental not to merge, we suggested . . . that an alliance partnership . . . would be compelling and allow us to achieve many of the benefits of a merger,” United chief executive Glenn Tilton told employees in a recorded message Thursday”.
Guess you didn’t read the article.
Continental and United have incompatible fleets which would be difficult to rationalize. Continental has an all Boeing fleet. After United grounds its 737's, all its narrow bodied planes will be Airbus A320 series except for its fleet of 757's. Even their Boeings would be hard to rationalize into one fleet. Continetal's 757's have Rolls Royce engines, while United's are Pratt and Whitney. Continental has GE engines on its 767's and 777's, while United's 767's, 777's, and 747-400's all have Pratt and Whitneys. It's easier to coordinate as separate airlines in alliance than to try to combine those fleets into one fleet.
Bloomberg News allows none of their material to be posted on Free Republic. Your response in #3 has been removed.
I have flown United overseas to Japan and back exactly twice and will never fly them overseas again. What a putrid airline. Old, small seats and old, big-seat attendants.
I flew United two weeks ago while on government business (Uncle Same has an exclusive contract with UAL, so I was forced to do it), and the ground staff and flight attendants were overworked and grumpy, the jets were overcrowded and seedy looking, and my luggage arrived on my last leg home a couple of hours late. The whole experience sucked!
The best flight airline is Singapore Airlines. Beautiful, clean and roomy cabins. Lovely attendants and ground crews who are actually glad to serve a customer. Hard to believe they accepted the Star Alliance with United this past year. But United has the oversea market to Japan so I guess it made sense to them.
Continental announced they were pulling out of some markets a few weeks ago “due to rising fuel costs.”
I was steamed, plain out STEAMED, when they pulled out of Reno. Their 2 roundtrips daily to Houston from Reno were at 80% capacity, and I’m one of those people who use AMEX points to convert to Continental miles for NYC trips.
So now I’m forced to use United, and basically sitting on a ton of unused Continental miles.
I want to see how this is all going to work out, like can you book a United flight using Continental’s online reward travel website?