This entry was posted on Tuesday, April 20th, 2010 at 10:01 am and is filed under Airline Service, Business travel. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
If like others that travel for business, you have recently been entertained by the seemingly sudden turn of events in rumors of a United/US Airways merger. Seems to have come out of the blue considering all the constant speculation of an earlier merger between United and Continental (which has its own sudden turn of rumors). While we hate to see airlines brands disappear, we have long been proponents of an industry that does no harm to the frequent flyer mileage savings account that most travelers have. For some of you, this latest merger talk is nothing new – you likely read my Twitter post dated February 19, 2010 where I posted the following, “Just saw more airline merger comments by UAL CEO and everyone is thinking w/ Continental. I may be alone, but my money is on UA/US Airways.” At that point no one was talking US Airways, but then again, you pay a subscription to InsideFlyer for a reason.
Here’s my take on this one since it seems to now have the highest buzz and the timing is rumored to be on/off by months end. Driven by United, it is clear that United Airlines would be the surviving brand and no doubt in my mind, that Mileage Plus would be the surviving frequent flyer program. This means – all your miles would be safe, no worries, no dilution and no problems.
This potential merger has made sense to be in recent times because I think United has been posturing themselves just for this. I don’t think they can afford Continental Airlines (known as the best run major airline in the business) and it would allow them to get comfortable in remaining relative to the industry since United does still smart by the merger of DL/NWA and there is only so much low hanging fruit (read that as “being affordable”). Yes, egos still remain in this industry. I also think that CEO Glen Tilton would like to see something of a legacy left from his time in the industry and a merger is likely the only thing left for him to hang his hat on since leading an airline from bankruptcy is hardly legend, especially since he also lead them into bankruptcy. Mr. Tilton is not a public facing CEO and I have no doubts that the power struggle of John Tague/Doug Parker would be interesting since of these three (John Tague is currently the President of United Airlines), Doug Parker is easily the most public facing and seems to feel comfortable with the public, the media and the analysts – something that I actually think would benefit UAL and give way to Mr. Tilton able to leave the industry on an upbeat note. This leaves Mr. Tague (one of my very favorite executives in the entire industry) to actually continue doing what he does best – run the business.
Of the merger of these two airlines, it is likely that no one gains more than the members of US Airways Dividend Miles. While members may miss the aggressive manner in which Dividend Miles has promoted earning Preferred status the last few years, they won’t miss the attempts by Dividend Miles to dilute those very same benefits. We’ve seen Save Dividend Miles and we’ve seen Save SkyMiles, but to date, no express effort or need to Save Mileage Plus (though, I stand by to support that effort if necessary). With the recent changes in Mileage Plus relative to upgrades, members of both programs will be comfortable with the current policies of both airlines. The biggest plus for Dividend Miles members might be that finally all the United award inventory will be shared in easy to access, something that has not been true in the past.
Overall, given that these two airlines are members of the Star Alliance and share similar partnership benefits already, this is as close to being a keeper and sleeper as they come with just the smaller hurdles to be adapted to. Smaller hurdles I might add than the recent WorldPerks/SkyMiles merger. The downside is that Barclays would be out as a credit card provider over time (Chase simply would not let this go).
Bottom line: I’m all in on this possible merger.
Now a few words about Continental and United Airlines. It was reported that Continental would make a bid for United Airlines. Frankly, I don’t think that Continental could afford United unless there was some unbundling of United before such a bid or as part of the deal. The reason is simple, the value of United’s Mileage Plus program adds a few billion dollars into the equation, a value that Continental doesn’t currently have or can calculate with their own frequent flyer program. United has for nearly ten years prepared the spinoff of Mileage Plan to the public market, a la Air Canada’s Aeroplan. Frankly, if it had not been for the dot.com meltdown starting in 2000, Mileage Plus easily would be where Aeroplan is right now and perhaps even farther along. But that story is for another day and as we all now know, the dot.com crash did happen. The point being that Continental can ill afford to pay the acquisition cost of United when United is holding this huge, though untapped, trump card in the value of United. Anyway, that’s my basic view of that situation.
Bottom line: I would not be happy with this merger.