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United-Continental merger likely means fliers will pay more

Consumers probably have more to lose than gain from a merger of United Airlines and Continental Airlines, which the carriers announced Monday.

The two airlines have already entered into code-sharing agreements and a frequent-flier alliance that provide travelers with many of the benefits of a combined airline. But if the merged airline cuts capacity, it could lead to higher fares and reduced service in some markets.

The consumer impact "is mainly bad," says Ed Perkins, a columnist with SmarterTravel.com. "If you look at what the financial people are saying, the whole purpose of the merger is to reduce competition so they can raise fares. The airlines put up a smokescreen about seamless service and more destinations, but they already do that through these worldwide alliances."

Whatever happens, it won't be soon. The merger is not likely to close before December and it could be months after that before changes are implemented. Routes and fares will also be affected by the economy and the response from competitors. With that in mind, here's a closer look at the consumer impact.

Routes and fares: The airlines say they have little overlap in their domestic route system and none internationally.

Continental's U.S. hubs are in Houston, Newark and Cleveland; United's are Chicago, San Francisco, Denver, Los Angeles and Washington.

If the airlines consolidate overlapping routes, fares could go up in those markets.

Although the airlines boast about the expansive route system the merger would create, they already have a code-sharing agreement that lets them sell tickets on each other's flights.

Frequent-flier programs: United and Continental belong to the Star Alliance, which lets members of each airline's frequent-flier program earn and redeem points on the other carrier's flights.

One drawback of the current system is that a person cannot combine points in his United Mileage Plus account and his Continental OnePass account to redeem a free ticket or other award. After the merger, he could.

Post merger, the programs will combine and adopt a standard set of rules. Today, "United's miles expire after 18 months if you don't have any activity in your account. Continental's don't expire. I'm guessing they will go with United's policy" after the merger, said George Hobica, creator of airfarewatchdog.com.

Both frequent-flier clubs let members earn miles by using their credit cards. Both cards are issued by Chase, so, "it's probably not going to be as much of a problem" as it would be if they had different card issuers, said Lynda Young, managing editor of InsideFlyer.com. But the cards have different rewards and fees.

Young predicts that after the merger, competition for free seats and upgrades will get tougher if the airlines cut capacity.

Cabin configuration: United has four cabin classes — first, business, economy plus and economy. Continental has only two: Business/first and economy.

Rick Seaney, chief executive of Farecompare.com, predicts Continental will adopt four cabin classes because it generates more revenue. Economy plus, which charges extra for more legroom in coach, "became a hot product for United" during the recession as companies downgraded from business class, he said.

No bag fee?

Delta Air Lines says it will waive the fee on the first checked bag for most customers with Delta SkyMiles credit cards issued through American Express. The move could pressure other airlines to waive bag fees for their credit card users, too. Starting June 1, Delta will waive the fee for up to nine people on the same reservation. The fee to check the first piece of luggage on Delta flights is $25 each way.

Associated Press

. Pros: The merger would create the world's biggest airline, with 10 major hubs and a more expansive route system. • Members of each airline's frequent-flier program can earn and redeem points on the other carrier's flights.

. Cons: Less competition could mean cuts in capacity and higher fares. • If a merged airline, which would have 20 percent of the domestic market, were to undergo a pilot strike, the disruption could be crippling.

United-Continental merger likely means fliers will pay more 05/05/10 [Last modified: Wednesday, May 5, 2010 8:53pm]
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