United and Continental to announce merger

by Charlie Leocha on April 30, 2010


As we, and half of the airline reporters, have posited, Continental and United Airlines are getting ready to announce their engagement. It happened quickly as we suggested it might in an earlier column. These two airlines had already tried each other on for size about two years ago.

It didn’t work back then, but times change, situations change and CEOs change. To be honest, I still don’t buy into the bigger is better argument. I certainly don’t buy into the one good airline plus a bad airline creates a better airline.

Frequent fliers aren’t going to get that much of a benefit, since these two have already married their frequent flier programs to a degree through alliance membership.

Route structures will shift around, but no giant shifts or closures of hubs are envisioned going forward. Of course, there is a question about what the heck Continental will do with its Cleveland hub.

Customer service at United can only improve. Bringing it back to a U.S.-based operation, merged with Continental’s, may help.

The biggest problem with this merger will be bringing the people together. Unfortunately, I foresee a giant problem that will affect service for a long time. And I’m not even talking about the messy business of merging union seniority lists.

From a United employee’s point of view, this deal has all upside potential. Continental’s workers are going to take it in the shorts.

• There will be thousands of more job losses at Continental than at United since United has already been cut to the bone.

• The Continental pension program will be slowly gutted (maybe no so slowly) and replaced with a less-generous arrangement.

    Continental workers last week received a letter (ominous on its timing) about their pension programs explaining “financial status to participants.” The letter offered an option for employees (or retirees) to go online and “request your current accrued benefit estimate” — previously this information was not readily available. It also included a section on “Rules governing termination of single-employer plans.”

• If the headquarters moves to Chicago, as rumored, more Continental workers and executives will be uprooted and forced to move.

Then there is the problem of merging a workforce with a high morale (Continental) together with one that has hit rock bottom (United). I am afraid that the above developments will only serve to dispirit Continental workers.

United Airlines had bad management/employee ratings. It earned a 2.0 rating from its “dissatisfied” employees on Glassdoor.com that tracks employee sentiment. Continental is rated almost twice as high at a 3.9 rating. Plus, employees are “satisfied” and voted their company one of the best places to work in the country.

Browsing comments on bulletin boards and other sites from the past few months, finds positive comments from Continental workers like:

    … a small company feel, really cares about their employees.

    We are best of the major carriers.

    We have a great culture of taking care of our people.

    Good health and retirement benefits.

    …an absolutely fantastic corporate culture.

Comments from United workers are from another world. (About the only good comments found were that their jobs offer travel benefits.)

    An unbelievable adversarial management style!

    Employees have a tendency to feel unheard.

    Totally unfair employee evaluation and advancement process.

    Some flight attendants are bitter and do no enjoy working there anymore.

    Morale is down among all work groups, pilots, mechanics, agents, flight attendants, supervisors, etc.

It doesn’t take rocket scientists to figure out that the cozy Continental workplace is going to be rocked by this news.

Heck, Delta and Northwest managed to merge their disparate cultures, but along the way, Delta that was once known for top-notch customer service is now, after the merger, mired in last place in DOT’s quality ratings.

Larry Kellner must be fuming.

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  • Arizona Road Warrior

    This week, I was connecting through IAH and I heard three CO employees talking about the merger in the train\tram between the terminals. They were talking about moving to Chicago, that employees with at least 10 years of service should be safe and etc.

  • Arizona Road Warrior

    This week, I had four flights on CO. I think that CO is the best airline among the US-based airlines (AA, CO, DL, UA, US).

    This week, I had to deal with UA to book a new reservation with an unused ticket. First, the UA agent didn’t want to disclose the fares and fees. Once I was able to get the UA agent to disclose the fare, he won’t give me the lowest fare that was available on that day…a difference of $ 200.

    If the UA culture prevails in the merger, it will be a sad day for passengers that used to the CO quality.

  • Josh

    You think Larry Kellner is fuming? I’m sure you are right, but what do you think Gordon Bethune is is thinking and SAYING? Bethune is the one who brought Continental out of the gutter, and he was always one would would speak his mind (incidentally, he is also a qualified commercial pilot). Kellner did well at maintaining the successful course that Bethune set for Continental. I never believed Smisek was an airline person any more than he is a car person or bank person or anyone else other than a “professional manager”. This merger bodes ill for all concerned, especially customers (aka passengers).

  • http://[email protected] Albert Henry Bruton

    All this means is that United will now be as bad as Continental.
    Continental, The worst airline I have ever flow with.
    I have only been on them 3 times.
    1st time Toronto to L.A. Transfer in Newark. They couldn’t find the plane to L.A. 4 hours late.
    2nd time Vancouver to Rio. Transfer in Houston. Toilet didn’t work. 5 hour delay.
    3rd time Lima Peru to Vancouver. Supposed to be 11 hour flight. 51 hours to Vancouver. 12 page letter to Continental about this royal screw up. Result? $200.00 credit toward future flight if taken within 3 months.
    Guess what I did with the credit note. It wouldn’t fit on the roll in the bathroom. Used it any way.

  • REECE THOMSON

    OMG, what a disaster for we Continental flyers!!! Now with the best domestic merging with the second worst what are we going to end up with? I don’t feel United has the capability or desire to upgrade their standards so we will probably go to the lowest common denominator!!! I was hoping the bottom two – US Airways and United would merge; at least we would end up with only one bad airline and not two as we now will!! I wonder what the Continental Employees are saying, and what Bethune is thinking!!!

  • John M

    What ever happened to anti-trust laws? Anyone, anyone, Bueller?

    Seriously, this means that 3 airlines will control about 75% of the US domestic market. This is anti-consumer and anti-competitive and therefore a bad idea.

    As for the hubs, at least 2 and maybe 3 will go away. Cleveland is a given. It is toast in this merger. Then will Dulles go away or will Newark? Denver or Houston? I wouldn’t feel too safe if I worked at either airline as there will be lots of people moving around.

  • MVFlyer

    For hubs going bye-bye:

    Houston is safe since it’s the main Latin American transfer point–one of CO’s strengths.

    No way CO would give up Newark–it’s nearly a fortress hub and they’ve invested far too much in it.

    Denver should be OK since this would the combined airline’s only western domestic hub.

    SFO is the main Pacific hub–therefore safe.

    Chicago also should be OK esp. considering HQ of new company moving there, and new airline won’t want to cede it to AA.

    On the chopping block: LAX (shrinking anyway), Cleveland (too close to Chicago), Dulles (Newark would become primary overseas hub, and UA is in a lousy terminal anyway–very unpleasant place to go through)

  • Henry Mensch

    how can this *not* lead to something else that’s “too big to fail?”

  • Fred

    Look, what does it matter? This will happen so get used to the idea. I have seen dozens of airlines disappear in my lifetime, some once very dominant like Pan Am, Eastern and TWA. I have seen many “big fish swallowing small fish” deals like Mohawk, Piedmont and PSA ultimately becoming part of USAirways which got swallowed by America West which took the name. Anybody remember Western and Northeast now long-disgested into Delta? Life is life. United will still be big time at SFO and I’ll have some new choices. The really big question is the name. I assume it will be United, but who knows? Maybe something new like “Colossal”

  • Mark Matlock

    I am a long time Continental elite level (platinum currently) flyer.. Continental is certainly, by far, the best of the legacy carriers, United and USAir are
    the worst and I mean worst. I guess it’s time for me to retire, I just don’t think I can handle all the garbage and lousy airlines to boot. The CO executes who are responsible for this should to drawn and quartered.

  • Mindy

    Moving your executives and base of operations from Houston, with a low cost of living, to Chicago, where the cost of living is much higher, doesn’t make financial sense. If I were a stockholder, I would be fuming.

  • http://MtnTravel.com Joseph Sobin

    From a business view, the merger makes sense as the merged airline will have routes around the globe penetrating most markets with the exception of Australia/New Zealand and Africa. For consumers of both legacy carriers, this is a perk i.e. seamless routes and so forth.

    I agree with the author’s points and if I were an employee of CO. I too would be concerned. However, I would also suggest looking at the macro view. Since deregulation we have lost multiple legacy carriers i.e. Pan Am, TWA and others. The recent merger of Delta/NW may have paved the way for this merger as legacy carriers may feel they must merge to survive i.e. the next oil shock or downturn in passenger traffic.

    For UA and CO, their non-competition of hubs and expansive route network should be a benefit for the flying consumer. While I believe competition is needed to keep airfares in-line, their hubs have competition from regional carriers as well.

    The UA/CO merger (if it rec. regulatory approval) may actually be able to compete with European and Asian carriers, many which are “financially supported” by their countries. The US market is the most competitive concerning airline service.

    Unless we return to regulated routes and fares, mergers such as DL/NW, UA/CO and F9/MX is what will keep airlines in the air and out of Chapter 7,11,13.

    One final note, of interest, both airlines have been in or close to Chapter 7,11,13. Let’s hope the merged entity is a stronger entity which can survive the ever volitile airline financial scene.

  • Frank

    John M April 30, 2010 at 5:51 pm
    What ever happened to anti-trust laws? Anyone, anyone, Bueller?
    Seriously, this means that 3 airlines will control about 75% of the US domestic market. This is anti-consumer and anti-competitive and therefore a bad idea.
    ==================================================

    Ok, I’ll bite. FEWER AIRLINES, SOMEWHAT HIGHER AIRFARES (LCC’s will always exist in this country) BETTER CONTRACTS for employees.
    Hence, a “HEALTHIER INDUSTRY”.

    IT’S ABOUT TIME.

  • Robb

    SAD DAY FOR CONTINENTAL ELITE FLYERS

    SAY GOODBYE TO THE NICE 5 COURSE MENU ON NEWARK
    TO THE WEST COAST FLIGHTS

    UNITED WILL DESTROY MEAL SERVICE FOR FIRST CLASS

    CONTINENTAL HAD THE BEST MENU UP THERE FOR COAST TO COAST SERVICE

    UNITED WILL NOT PROVIDE THE LEVEL OF SERVICE YOU ELITE
    FLYERS ARE USED TO.
    YOU BETTER GO WITH AA OR VIRGIN AMERICA

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