United/Continental merger ‘on track'

United/Continental merger 'on track' Passengers will experience most of the changes in the next 12 months. By Jenalia Moreno jenalia.moreno@chron.com Published 12:16 p.m., Friday, May 13, 2011 HOUSTON — A year after United and Continental airlines said they would merge, the visible changes have been mostly small, along the lines of new paint schemes on jets and ads featuring United's name and Continental's globe logo. There's still a long way to go to complete the combination, and passengers can expect major changes within the next year — from frequent-flier programs to what they see at airports. "We're making good progress and we're on track," said Jeff Smisek, the CEO of United Continental Holdings, who has met with employees at about two dozen airports since the merger closed on Oct. 1. "It's just knocking out issues one by one." The company must wait until it receives a single operating certificate — expected later this year — from the Federal Aviation Administration before it can fully combine its United and Continental units into just United. Until then, changes affecting passengers will roll out gradually. "We want to do as much as we can for the customer as quickly as we can, recognizing we can't legally become one airline until the FAA permits us to," Smisek said during an interview with the Houston Chronicle at his Houston office. For example, by 2012 Continental's jets will offer Economy Plus seating. That option, which has expanded legroom at higher prices, is now available on United. And United and Continental will have the same food for sale in coach on both Continental and United as of today, Smisek said. Ultimately, he wants to renovate the combined airline's airport lounges so they look similar and serve the same food and drinks. In between jetting from one airport to another to meet — so far — about 11,000 United employees, Smisek still sometimes occupies his office in downtown Houston, where Continental's headquarters was located. He also works out of Chicago, home of the merged carrier. He jokes that the winters there aren't as nice as in Houston. Since announcing the merger a year ago this month, airline officials have said Bush Intercontinental Airport will remain one of the new carrier's biggest hubs. Airport officials expect noticeable changes over the next 12 to 18 months. This month, the airline is planning Customer Day One. That's the first day the airline will start branding airport signs and kiosks with the United name and logo. The effort launches at Chicago's O'Hare Airport, Smisek said. Sign changes are scheduled to start in Bush Intercontinental's terminals on Sunday, said Mario Diaz, Houston's aviation director. The carrier also soon may renovate Terminal B, where Continental Express operates, Diaz said. "We are also talking about putting in new flight simulators at IAH, for the 787 aircraft. They could have put those flight simulators in Chicago or Denver, but right now they're going to put them in Houston, so that means more jobs," Diaz said. Mileage expiration issue Houstonian Spencer Howard likes some of the changes he's seen since the merger. United didn't offer free alcoholic drinks at its Red Carpet Club as Continental's Presidents Clubs did. Now, all of the United airport lounges provide complimentary beverages. The Gold Elite frequent flier also recently flew his first United flight ever and found the service friendly. He's hopeful that United also will take a cue from Continental — rather than vice versa — when its new frequent-flier program is announced in the fall. Continental's frequent-flier miles don't expire now, but at United they do after 18 months if there's no activity in the account. "I'm really hoping that they don't do that," Howard said. Some passengers say Continental's service has suffered since the merger. New York City resident and native Houstonian Jennifer Wright recently sent her 15-year-old son to Houston for a visit with his grandparents and found the staff at the check-in desk rude. "Given my experience, I'm not going to fly this airline anymore," Wright declared. "I've flown Continental forever. I am sad to see this merger." Plenty to deal with Since the merger, winter storms in Europe disrupted trans-Atlantic flights, turmoil in the Middle East drove up oil prices, and an earthquake in Japan halted flights to the nation. "In the first quarter of this year, we've had pretty much unthinkable kinds of disasters unfold in the world," said Michael Derchin of CRT Capital Group, a Stamford, Conn., research firm. "There's a lot of things being thrown at them, and it looks like they are weathering it pretty well." The merger created a larger company with more liquidity so that it could muscle through such tough times, Smisek said. "In the face of these very high fuel prices, I'm particularly grateful we merged," he added. The airline cut back on the number of planes it plans to fly because of fuel costs, stressing during its first-quarter earnings conference call that it would reduce its flying this year instead of increasing capacity. "Back when this whole thing was started, it was my impression that it would result in more flying overall," said Jack Stelzer, president and CEO of Worldwide Transportation Group. "Now, with the fuel prices going where they are," he said, "it becomes doubtful whether that will happen in the short term." Looking ahead, the carrier still faces challenges including integrating labor groups and technology. "To me, there haven't been any surprises in the merger," Smisek said, pointing out that the two carriers debated merging back in 2008. In 2009, Continental joined United's Star Alliance, a network of carriers that cooperate on marketing and ticket sales. Rick Seaney, CEO of the website Fare Compare.com, said he thinks it likely the merged carrier will face technical glitches as it combines the reservation systems. "There is a pretty big difference between the two," Seaney said. Smisek said the merged airline has about 15 major technology platforms, including the reservations, pilot training and frequent-flier program systems. "We're technologically a very sophisticated company," Smisek said. "I've got a lot of confidence in them." Labor negotiations appear to be going well because most the talks have stayed out of the media spotlight, said William Swelbar, research engineer at MIT and an airline blogger. "Every merger has some labor issues along the way," Swelbar said. In order to fully integrate the airlines, labor groups from both — including flight attendants, pilots and mechanics — also must merge. "I would love to get all of our work group contracts done by the end of this year," Smisek said. Merging those unions helps determine seniority, which dictates everything from salaries to vacations. Leaders of the United and Continental pilots unions and airline management began meeting in different U.S. cities last August to work out details for a joint collective bargaining agreement. They have reached agreements in principle for seven of 25 contract sections, but the more complicated issues of wages, retirement and scope remain. "We're up to the really, really difficult ones," said Capt. Jay Pierce, chairman of the union chapter representing Continental pilots. "In order to have the seniority list integration, we have to have the contract done." Jobs being lost Job cuts still are expected out of the Houston office, which among the positions it will keep include some in technology and accounting, Smisek said. Airline officials are interviewing management and clerical employees to determine who will stay. "We are going through a talent selection process," Smisek said. "The exact numbers of jobs and the exact identification of people who will stay and people who will go, we're not done with, will not be done with it for a while." Some employees chose to leave because of uncertainty, and some have relocated to the Chicago operations. Read more: http://www.mysanantonio.com/default/article/United-Continental-merger-on-track-1377818.php#ixzz1MLah9E2J