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What a United-Continental Merger Means for Frequent Flyers

This morning, Continental and United issued a joint press release, confirming what had been assumed for several days: Subject to shareholder and regulatory approval, the two airlines will merge to become the world's largest airline.

Among the groups that will be most directly affected by the tie-up are, by definition, the two airlines' frequent flyers, in particular members of the Continental OnePass and United Mileage Plus loyalty programs. What changes does the merger portend for them?

Because of steps the two carriers have already taken to align their mileage programs, a program combining OnePass and Mileage Plus would probably look very much like the existing programs, which already look very much like each other.

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The process of alignment began with Continental's switch from the SkyTeam alliance, anchored by Delta, to the Star Alliance, anchored by United, in October of 2009.

Alliance partnerships are sometimes referred to as virtual mergers. While that may be overstating the case somewhat, it contains a kernel of truth. And Continental and United were quick to go beyond the usual alliance forms of cooperation—reciprocal frequent flyer participation, schedule coordination, and code sharing. They revamped their award charts to match up geographical zones and share upgrade policies, for example. And in November they announced plans to offer extra perks to each other's elite members later this year.

As a result, today OnePass and Mileage Plus are more alike than they are different. So combining the programs is more likely to provoke a sense of deja vu than of disorientation.

One issue yet to be resolved is the fate of United's Economy Plus seating, a nice perk for elite members when an upgrade to business or first isn't available.

There's also the more complicated question of the company's commitment to its loyalty program. That will depend on the corporate culture of the new company, which in turn will depend on the makeup of the executive ranks.

Continental is generally considered to be a better managed company than United. On the other hand, United has been significantly more aggressive, and creative, in its loyalty marketing than Continental.

While it has been decided that Continental's Jeff Smisek will be the new company's chief executive officer, it will be some time before we know who will be calling the shots in the loyalty marketing area, and whether that person will bring a Continental or United approach to the program.

When OnePass and Mileage Plus are consolidated, the new program will be the largest in the world. And larger is better, at least insofar as it means more flights eligible for mileage accrual and redemption. According to the merger website:

Combining the loyalty programs of Continental Airlines and United Airlines will create the industry's leading frequent flyer program, providing more opportunities for more customers to earn and redeem more miles in more places worldwide with more partners, including our Star Alliance partners. The new frequent flyer program will combine valuable features of Mileage Plus and OnePass from United and Continental.

When Delta and Northwest merged, Delta promised that its program would not only be the world's largest, it would also be the best. That hasn't happened. If anything, I've heard more complaints than ever about Delta's program post-merger.

That's not to say that there won't be some consumer benefits to merging Continental and United, and consolidating OnePass and Mileage Plus. But the "industry's leading frequent flyer program"? History suggests we shouldn't believe it until we see it.

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