It looks like the Continental executives took a hard look at the marriage plans between Delta and Northwest and decided that life as the third man out could get ugly. Just like the days on the playground, they decided to find someone else to play with.
Taking a page from the observations of Lufthansa and Swiss Air Lines, Continental and United have decided that perhaps keeping distinct corporate identities might be better than merging their struggling brands.
According to the latest news, Continental intends to join the Star Alliance Network with United Airlines and US Airways. An internal memo from Continental states,
Continental Airlines today announced that it intends to transition into the Star Alliance from the SkyTeam alliance as a result of a review that was conducted following the Delta-Northwest merger announcement.
For the time being, the Continental/SkyTeam relationships are business-as-usual. Continental is committed to making this transition in a very customer-friendly manner. There will be a significant
transition period, including regulatory approvals, for Continental to move from one alliance to another. Until further notice, OnePass members can continue to earn and redeem miles on SkyTeam airlines and
SkyTeam lounge reciprocity continues as usual for SkyTeam Elite Plus members traveling on international SkyTeam itineraries.The change in alliances will allow Continental’s customers to benefit from the larger Star Alliance network, which has truly global coverage including 20 airlines. Continental’s customers can continue with all of their travel plans as they exist today, and no changes to OnePass
accounts are necessary.In the future, after a transition period that we expect will last at least a year, OnePass members will start to have reciprocity for earning/redeeming miles on other Star Alliance airlines and the SkyTeam reciprocity will end. In addition, Continental’s Platinum Elite members traveling on international Star
Alliance itineraries will have access to Star Alliance lounges at a future, yet-to-be-determined date.In the U.S., Continental intends to code-share with United Airlines, a primary member of the Star Alliance, and code-sharing with Delta and Northwest will be phased out. We will communicate further details once they are confirmed.
These machinations and shifts within the airline alliances are not going to happen overnight. Changes like this require an approval by the Transportation Department for antitrust manifestations. However, the approvals are expected to come fast and furious since Northwest, Delta, Air France and KLM have just been granted a similar exemption. The airlines expect to be able to begin making these changes during the first half of next year — 8 to 10 months from today. The Wall Street Journal spells out the hurdles in a blog posting:
Alliances are also subject to antitrust review by the Department of Transportation. That presents a much lower bar than the DOJ approval a merger would need. United is betting that an alliance can be a fill-in plan to grow revenues because it is much more easily approved than a merger.
So what does this mean to you, the customer and frequent fliers?
Certainly, this alliance is going to eventually result in a reduction of capacity and fleet for United, Continental and US Airways, therefore resulting in higher fares once duplicate routes are eliminated or, more than likely, consolidated.
Consider where frequent flier loyalties may lie in the future – Star Alliance or SkyTeam? Continental’s membership in SkyTeam will become a thing of the past, leaving Delta, Northwest, or a combination thereof, as the major domestic players in that alliance. It looks like a good, old-fashioned legacy rivalry between Continental, United and US Airways and Delta and Northwest, might be in store for us in the future.
Where will this leave US Airways, given the depth and breadth of Continental’s and United’s operations, and US Airways’ transformation to a low cost carrier? Is US Airways going to be left out in the cold? Or as a colleague asked, will US Airways be “the ugly girl at the prom without anybody on her dance card in the latest round of merger/combo mania?”
US Airways may fit right into the reduced flight matrix that will be constructed between the three airlines. Heck, with an alliance, these three airlines — Continental, United and US Airways — can reduce flights by a two-thirds. However, through the magic of codesharing, they can maintain the same number of flights on their schedule.
Perhaps the day of the full-service legacy carrier is not dead and gone after all (a bit harder to believe). Continental and United still offer, for the most part — give or take a few fees and meals — the kind of traditional, full-service travel we are used to, rather than the low-cost, pay-as-you-go model that has gained in popularity among those who desire basic transportation from A to B without any frills. The most likely scenario will be a full-frills international operation and a no-frills domestic business.
American Airlines has been put in a difficult competitive position. It is the only major airline that has not benefited from the cost reductions available through bankruptcy. Now it has slipped from the largest air carrier in the country to number three if the Delta/Northwest deal goes through and United/US Airways/Continental team up. And, unlike their linked-up competitors, they have no real route network across the Pacific.
American’s executives must be pondering their airline’s future at the moment.
Update: Here’s an internal memo from US Airways, detailing how the changes will affect the airline.
With today’s announcement of Continental Airlines’ plan to join the Star Alliance network and partner with United Airlines, our longstanding codeshare relationship with United remains intact, as does our status as a Star Alliance member carrier. In recent days, we have reaffirmed our codeshare with United and our continued participation in the alliance.
Here are some questions we anticipate you might have, and, of course, their answers:
Q. Does this change our codeshare relationship with UA?
A. No. As part of the process to invite CO into Star Alliance, we reaffirmed our relationship with UA and our position in Star Alliance. The US-UA codeshare program will remain one of the largest codeshare programs in the industry.
Q. Isn’t Star Alliance already the largest global airline alliance? Why do we need another North American member?
A. Each member of the alliance brings unique value. The CO route network brings new destinations and additional service in important markets that have limited service by current Star Alliance member carriers. CO customers will gain access to additional services not available to them today, including airport lounge and frequent flyer benefits.
Q. Will US reduce flying as a result of United’s new relationship with CO?
A. No, today’s announcement will have no impact on the level of US operations. Codeshare programs, frequent flyer cooperation and other aspects of an airline alliance help to increase the number of passengers US Airways carries.
Q. Will US and CO enter into a codeshare agreement?
A. We haven’t had discussions yet on a possible codeshare or potential bilateral relationship with CO.
Reporting with contributions by Charlie Leocha and other tripso staff.
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United CEO Glenn Tilton said Continental, which has a valuable hub in Newark, N.J., serving New York, “would bring significant new assets to our global alliance.”
Yeah, the only hub in the US with more regular delays than O’Hare.
Even though this is not a merger, it does feel a little like one. For those of us who fly from smaller regional airports with both carriers, I am sure we will suffer flight reductions. For example, TYS has CO, UA, US Express–wonder how long that will last once this alliance materializes?
And Janice brings up an interesting point. What about the hubs of both carriers? Which ones will survive this cooperative relationship?