=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/c/a/2008/06/26/DDT211E6FM= .DTL --------------------------------------------------------------------- Thursday, June 26, 2008 (SF Chronicle) Continental-United 'cooperation': cutbacks Ed Perkins, Tribune Media Services Last week's announcement that Continental and United plan to "cooperate globally" is the latest wrinkle in the giant airlines' push to combine. For consumers, the net result will look almost the same as a full merger, with the same effects: greater network scope and reach, more flight cutbacks, and more fare increases. United is already trying to sell the agreement as a benefit to its frequent fliers, but that's blowing smoke: Although United frequent fliers will be able to book award travel on lots of Continental routes, they'll be competing with Continental's frequent fliers for seats on both lines. At best, it will be a wash for frequent fliers. And, up or down, nothing much will happen for a year or more. Until a few months ago, chances were pretty good that Continental-United, Delta-Northwest and American-somebody would try to engineer all-out mergers. They universally blamed high fuel prices for the need to merge but that was an excuse, not a reason: The real reason was to reduce competition and thus allow easier fare increases. And the big lines were willing to take on the major challenge of possible government opposition and the hassles of working out labor agreements to make it happen - especially since the top execs expected to cash out big on the deal. Now, however, the dealmakers can no longer see the big stock spike they once relished, and they realize that they can't afford years of wrangling with either the government or with pilots, mechanics and flight attendants. Non-merger cooperation may be the best they can do. And, given a modest amount of antitrust immunity, those non-merger mergers will probably offer most of the benefits of full mergers without the tribulations of the full merger process. I certainly wouldn't be surprised to see Delta and Northwest move in that direction quickly. And I also look for a big push on the part of U.S. airlines to work out closer deals with some European and Asian mega carriers. American and British Airways, for example, would love to expand their deal, as would United with Lufthansa and Delta/Northwest with Air France/KLM. The Continental-United agreement would certainly extend the two lines' network scope. Continental operates strong hubs in the New York area (Newark) and Houston - areas where United has traditionally been weak - and United has strong hubs in Chicago, Washington and San Francisco - all weak areas for Continental. United is strong across the Pacific, and Continental is big in the Caribbean and Latin America. Delta and Northwest would also complement each other's route structures. The disadvantage for most consumers, however, would outweigh the advantages. Either one or the other of the two lines - maybe both - will probably cut back still further on flights to and from small and midsize cities, and reduce schedules on even the more popular routes. And they'll squeeze leisure travelers: increased fares for their lowest-priced seats, fewer seats allocated to the lowest fares and increased restrictions imposed on those cheap tickets. Travelers on routes not served by a robust low-fare line - AirTran, JetBlue or Southwest - will see few counters to upward pressure on fares. The supposed advantage for frequent fliers will be improved earning potential for miles and elite status, as well as incremental geographical coverage. But these days, the problem isn't earning the miles; it's using them. Cooperation or no, the big crunch will remain finding seats and upgrades. And I see nothing in the cooperation agreement that would lead either line to increase the allocation of seats for frequent fliers. I've never subscribed to the theory that combining two losers somehow makes a winner. But the big airlines are in such a terrible financial bind that I suspect they'll get the various government agencies to cooperate - with maybe a few trivial limitations. The next few years will be tough for air travelers, although, to be fair, they'd be tough whether or not these specific deals are accomplished. ------------------------------------------= ---------------------------- Copyright 2008 SF Chronicle <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> If you wish to unsubscribe from the AIRLINE List, please send an E-mail to: "listserv@xxxxxxxxxxxxxxxxx". Within the body of the text, only write the following:"SIGNOFF AIRLINE".