Well after what amounted to a week-long hiatus from publishing this blog, I'm back. And I picked the right time… Because today, United and Continental announced their long rumored merger. This wasn't any sort of surprise, as the two airlines had been dating each other on and off for the past few years, and just finally consummated the relationship. The merger will be done as an all-stock deal, valued at $3 billion. The merger will form the world's largest airline, 10% larger than Delta. The new corporation will keep the United name, but in a surprising twist, Continental's logo and livery.
Which brings me to the first major question I have about the merger…
Who's Gonna Be in Control?
This is one of the major questions that is going to be answered in the next few weeks as details become clearer. But from what I've gathered, the new airline will have its headquarters in Chicago, but Continental's Jeff Smisek will be the head honcho. To me this signals that the airline is looking to combine the employees of the two brands, rather than allow just one to lead. This is a wrong decision on so many levels. Despite the job UA's top people have done in turning around that company, Continental's have done a better job. Just looking at their finances will prove my point. CO has been much closer to a profit than UA in the past 15 quarters or so. With Continental making the decisions, it is my belief that the airline could easily succeed, unfortunately that's not the case.
Are They Keeping First Class?
United is one of only two US airlines to still offer a first class product internationally. Makes sense, considering that they're hubbed in some of the most business-centric towns in the US. But Continental has a great Business Class product, BusinessFirst, and converting all those birds into three class aircraft would take a serious investment. Not to mention, a lot of markets can't handle the three classes. I think that United should actually keep the two classes, as it would allow them to better mix the routes they serve.. Lufthansa and British Airways both operate mixed fleets abroad.
What Routes Are Going to See Equipment Changes
Part of the point of this merger is to consolidate and reduce capacity. The other thing it does is allow them to "right size" certain routes, ie. putting the right capacity on the route. So where do I see capacity being cut? The obvious one is Cleveland. Cleveland actually performed an important role for Continental by allowing them to flow lower-yielding connecting passengers to the East through Cleveland, leaving the higher yielding O&D to Newark. But now Washington Dulles, and Chicago O'hare can perform the exact same function, and as stronger bases can support more flights. Therefore, in the short term, I'd expect some of the longer regional routes to be cut, bringing the hub down to around 150 daily flights. Longer term, it'll probably shrink down to around 50 or so flights that can support themselves on O&D. The other thing that should occur immediately happen, is international flights will see aircraft changes to add or reduce capacity. Some examples are Newark-Tokyo, and Houston-London, which may be shifted to larger aircraft.
Over the next few days I'm going to take a longer look at this merger
Here's a site about the merger:
http://www.unitedcontinentalmerger.com/
What a fantastic blog for people who love aviation!!! Congratulations!!!
Please visit a portuguese blog which shows aerial picturesfrom Portugal taken during my flights:
Third Dimension – Aerial Photography from Portugal
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