Less than two months after rejecting a marriage proposal from United Airlines Inc., Continental Airlines Inc. on Thursday decided it still wants to be friends.
Houston-based Continental and United on Thursday announced plans for forming a comprehensive codesharing alliance, linking their networks and (hopefully) creating seamless connections for passengers of both airlines. The deal envisions Continental eventually joining the international Star Alliance, which was founded by United and includes Deutsche Lufthansa AG, Air Canada, Singapore Airlines and a number of other carriers from around the globe.
The airlines in a statement said that the alliance, which is subject to Justice Department approval, would benefit customers as well as "creating revenue opportunities and cost savings and other efficiencies."
The deal has been widely expected since United ended merger talks with US Airways Group Inc. last month. The alliance would give United, which is a dominant player in the Midwest, West and trans-Pacific, access to Continental's large route network in Latin America, the South and across the Atlantic. Continental also held talks with American Airlines Inc. and British Airways plc about membership in their OneWorld partnership
For Continental, the deal offers a new beginning after years as the junior member of Star-rival SkyTeam. Continental faced the risk of becoming insignificant in Skyteam because its two domestic partners, Delta Air Lines Inc. and Northwest Airlines Corp., are in the process of merging and combining their trans-Atlantic operations with their European partners.
But the alliance deal is not without risks. While advocates of codeshares argue that they provide some of the revenue benefits and efficiencies of consolidation without the operational risks and labor integration headaches, the alliance is unlikely to provide all of the cost savings of a full-blown merger. It is also unclear how Continental's entry into the international alliance will impact US Airways, a current member of Star.
The airlines must also show patience, as Continental is contractually bound to SkyTeam until nine months after the Delta-Northwest deal closes, an event not expected until near year's end. With all airlines suffering under the burden of sky-high fuel prices, that is a long time to wait.
- Lou Whiteman
See TheDeal.com story on Continental rejecting United's merger overtures
See Continental press release
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