|by Sean O'Neill||Airlines||21|
That's what the Wall Street Journal is reporting. If true, that could mean higher prices for tickets (as there will be less competition). But it could also mean more streamlined routes and better connections. What do you think? Should they merge?
UPDATE May 1:
United will merge with Continental, creating the world's largest airline--named United--and proving that there really are more ways to make things worse at O'Hare.
UPDATE: April 30:
For the first year after the mergers happen, fares will jump, especially on routes that serve smaller cities. If you have travel plans in mind, book those tickets now.
But over time, low-cost carriers like Southwest will swoop in and serve these markets, bringing fares back to their current levels. Unlike Continental and United, Southwest posted a profit last quarter. Plus: The discount carrier has a record of jumping into routes and airports that are abandoned during airline mergers. As expert Joe Brancatelli has pointed out, countless mergers in the past 30 years have not caused fares to stay high for the long term.
The merger would have some pros and cons, of course.
Pros: Connections will be easier to make, as airlines coordinate their flight times and routes. United has a strong network of flights to Asia, while Continental is strong in routes to Europe and Latin America.
Cons: Many planes on popular routes will be even more crowded. But flight delays shouldn't increase, except for the first few days of the mergers. Many towns and small cities will either lose routes or face higher ticket prices, at least for a year after the mergers. As a rule, on routes where United and Continental each fly a plane, there will now only be one plane flying. Obviously, the reality for any particular route is more complicated, but that's the general idea. Larger cities will also see fewer planes on routes to smaller destinations, again, at least for a year after the mergers. Expect changes for Atlanta, Chicago, Newark, Houston, and San Francisco, in particular.
Frequent-flier mile options will change, too. Many experts expect that budget-conscious, leisure travelers will find that it will be even harder to redeem frequent flier mile awards. On the flip side, business travelers who fly hundreds of thousands of miles a year may receive more perks and find it easier to redeem award miles. (More details for frequent fliers are available at Airline Examiner.)
Why are the airlines merging now? Two main reasons. No one wants to lend them cash because they have such a bad history of getting into bankruptcy and there's not a lot of free capital floating about right now. The airlines want to pool their capital funds together so that they can finance the purchases of new planes, especially during the aftermath of a recession.
One more caveat: The government will also have to approve any merger, of course. This will be the first high-profile test of the Obama administration's attitude to mergers that will likely raise prices for consumers, especially in Obama's hometown of Chicago.
What do you think? Should United and Continental merge?
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