So the rumors, that United and Continental were nearing a merger agreement, are apparently true: United and Continental will merge, with an announcement expected early Monday morning.

Assuming that federal regulators don’t put a stop to this, the newly combined airline (“Continited”?) will drop the Continental name and operate under the United banner. However, Continental’s CEO Jeff Smisek, will take the reins, with United CEO Glenn Tilton stepping back to the salutary title of “non-executive chairman” for two years. In other words, it’s Continental’s executive team, with United’s name, in United’s headquarters building. Assuming that current market shares simply transfer over to the combined entity, the merged United would have 21% of domestic ASM (available seat miles, i.e., market share) and 7% of global ASM, making it the biggest American player.

(Will this put an end to the on-again-off-again wooing of US Airways by United, in a seasonal display reminiscent of a National Geographic wildlife special? I sure hope so. It was growing tiresome.)

As I have argued several times over the years, these airline mergers are anti-consumer. True, there is no overlap between the United and Continental operating hubs, but a merger will give “Continited” a great deal of pricing power. Instead of re-inventing the wheel, here’s something I wrote in January 2007, that still holds true today:

Sure, you might get a few more potential destinations or routings for your flights, but the total number of flights is bound to be cut, and prices in turn are bound to rise. With less competition, it’ll be easier than ever to raise fares and make them stick.

The caveat to the “mergers mean higher prices” argument is that cuts in capacity (and increases in prices) eventually are met with new market entrants. Relatively constant demand is met with entrepreneurs wielding fresh supply. (The rise of JetBlue can, at least in part, be seen in the context of the disappearance of TWA and PanAm, through merger and bankruptcy, respectively.) The benefits to the merger participants are short-lived, and it’s debatable whether they actually pay off. Think back to past mergers: Is American really eating everyone else’s lunch since they bought TWA?…

In fact, the merged airlines’ competitors may benefit more. As fares rise, the companies that aren’t part of the merger arguably benefit more than the merger participants, because they get to raise their prices, without having paid the price of the merger…

So if consumers lose, and merging airlines don’t really win for very long, then who is the real winner in all this?

The answer: the CEOs, and the Wall Street investment banks advising them.

As the folks at Morningstar’s Footnoted.org blog noted earlier last week, the real motivator for a deal here isn’t “synergy” but “payday”:

We’re sure there are plenty of operational reasons United’s management might be looking for a deal. But we also couldn’t help noticing that the company has made it substantially more attractive for the top officers themselves to seal a deal — in the case of Chairman and Chief Executive Glenn Tilton, more than three times as attractive as in prior years.

According to the proxy that UAL Corp., parent of United Airlines, filed at 5:25 p.m. on Tuesday, Tilton’s payout if there’s a change of control rose to $9 million last year — up nearly fourfold from the $2.4 million listed in last year’s proxy. If he loses his job within two years after a deal, his payout would be $14.3 million, up 78% from $8 million last year.

Loses his job within two years? Why yes, that’s exactly what’s planned. What a coincidence!

It’s not just United’s current CEO who’s getting the big payday, either:

Other executives have seen similar jumps. Executive Vice President John Tague, also president of United Airlines, would see his payout in a change-of-control rise to $3.7 million, from $1.1 million. Total cost for the top five officers under a change in control scenario, even if none of them are fired: $17.6 million.

Footnoted’s post on the subject is worth reading in its entirety.

FYI: I am unable to get search results from the SEC’s EDGAR database right now, so I can’t see if there’s a merger bonus in the cards for Continental’s Smisek or not. (Try searching for yourself, using Continental’s stock symbol “CAL.”)

In coming days, you can expect the usual parade of executives touting the benefits and synergies of the merger. Don’t believe them. This merger is about them, not you.

Related posts from yesteryear:
- What will airline mergers mean to consumers?
- (Flashback to 2006) What’s in the cards for a United-Continental merger?
- (Flashback to 2008) Merger do-si-do: Continental spurns United, but other partners are ready to dance

Downgraded: Hare Krishnas
It’s the end of an era for American airports: Hare Krishnas are banned from soliciting for donations at LAX. There’s one more scene in the movie “Airplane!” that just won’t make as much sense to future generations.

Downgraded: Smoking in hotels
I didn’t realize that twelve states already had laws on the books banning smoking in hotels. Wisconsin is the latest, with the law taking effect this summer. Should be welcome news to the folks at FreshStay, the directory of smoke-free hotels.

Downgraded: Body scanner checkers
Well, it had to happen: An airport worker at Heathrow has had his wrists slapped for taking a picture of a colleague as she passed through the full-body scanner. Start the countdown for someone’s clandestinely-taken body scanner image appearing on the internet…

Upgraded, or is it Downgraded?: United Airlines 777s
United’s seating configuration in economy onboard its Boeing 777s has long been rather unusual. Instead of the usual 3-3-3 seat arrangement, they’ve had seats in a 2-5-2 setup. The logic of the 2-5-2 was that it minimized the number of passengers who had to climb over two people to get to the aisle — just the one person in the middle of the 5. But now they’re shifting to the more common 3-3-3 after all. (Personally, while it’s been a couple years since I’ve sat on a UA 777, I always liked the pair of seats on the windows. 17A or 21J, baby.) If you’re flying on a UA 777, be sure to check your seatmap as you get closer to flight date: your aisle seat might now be a middle.

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United Airlines has a short-term promo for those who want to ship their bags ahead, instead of checking them at the airport. Their “Door to Door Baggage” service, which transports your bags overnight via FedEx, normally costs $79 to $99 each way, but they’re cutting the price to $25.

From their press release (emphasis added):

For the low price of $25 per item each way, customers can send their bags, golf clubs and skis ahead to their final destination via FedEx standard overnight delivery.
[...]
Customers booked for travel between March 18 and March 29 within the continental United States on at least one United-operated or United-marketed flight are eligible. Sale prices are limited and available until 5 p.m. EDT on March 19 or while supplies last. Travelers may purchase the Door-to-Door Baggage option up to 10 days before departure.
[...]
A customer may ship up to nine bags at the limited $25 price, per bag. Weight, size and other restrictions apply.

Nine bags at that rate??! Wow. Cheap. If you’re moving cross-country, this deal is for you.

But… you have to reserve this by Friday the 19th. Which is a stupidly narrow window of opportunity if they really wanted people to take advantage. Needless to say, this won’t help a lot of people. But someone may benefit.

Both American and United have expanded their paperless boarding pass programs within the United States in the past week. If mobile boarding basses are your cup of tea, you’ll be able to check in wirelessly and receive an e-mail containing your boarding pass, which is scanned right off your phone at the gate.

American’s announcement brings their count of cities to 27 airports. United’s count is thirteen. Continental is still the leader, with 48 airports (including 2 overseas, in London and Frankfurt.) The TSA’s website lags reality, it seems, listing 43 airports in the US currently participate, across all airlines.

The expanded service is being pitched as a convenience to customers. And it is convenient, if you’re not able to print your passes. But be sure to save that e-mail or text message on the phone: If your miles don’t post, you’ll need to find a way to print that message to prove you actually took the flight.

This is only available at those airports where both the airlines and the TSA are linked up and able to scan the boarding pass. That’s what’s really holding this up from more widespread adoption nationwide.

Taking the convenience equation out of the picture for a moment: For you to move through security with one of those mobile boarding passes, you need to have it scanned by TSA first. What bugs me about this is the TSA’s involvement in the equation makes “revenue protection” the U.S. government agency’s job, in the name of security. (As I’ve argued ad nauseam, checking ID’s and passes does nothing to make you safer; true airport security does not hinge on holding a boarding pass or having an ID.)

This will be more and more widespread, going forward. But it’s still not truly widespread in its adoption — yet. In a reader poll back in November, 38% of readers had used a paperless boarding pass. That’s pretty high, but let’s face it, the readers of this site are highly travel-savvy, frequent-fliers. The general flying public is far less likely to have gone paperless. But not to worry, that will change.

United is once again “enhancing” its frequent flier program, Mileage Plus. My first thought was, “Oh no, here we go again.” I immediately flashed back to American’s rollout of one-way awards — which killed one of the best award ticket features, the free stopover.

With United, it’s actually a better proposition, on the whole. Don’t get me wrong: It’s a good news/bad news scenario. But on the whole, it’s better than AA’s offering.

The program changes actually incorporate two new policies: Cash+miles tickets, and one-way awards.

• Good: Cash+miles options
  United is offering a “Miles and Money” option, so a smaller mileage balance can be supplemented with cash. A nice option for flexibility.
• Not so good: Availability and fees
  However, it’s not available on every flight (“select flights”). I ran a few searches, and there was no cash-supplement option.

  Note also that you’ll be responsible for more fees (like airport passenger facility fees) which aren’t typically charged for tickets paid 100% with miles. So the cost for the Miles and Money option will be more than just the cash fare paid.

  The complete rules are here.

• Good: One-way awards
  One way awards are a great feature, especially if you’re traveling to a city that’s serviced by another airline that offers a similar award structure. (Say, fly one-way there on AA, and one-way back on UA.) United is making one-way awards available only via united.com, and you can only book flights operated by UA (no codeshares or partners). The one-way redemption chart is here. (pdf)
• Not so Good: The threat to stopovers
  Booking a ticket on entirely UA metal can no longer include a complimentary stopover. Each leg will need to be booked separately, as a one-way segment. This will drive the number of miles required higher. But this shouldn’t be a big concern for true stopover buffs. For example, if I were to fly from New York to Paris, spend a few days there, then fly on to Istanbul, and eventually return, that would have to be booked using a Star Alliance ticket. Those ticketing rules appear unchanged. But all-UA award itineraries — already less desirable than most Star Alliance partner flights — will be even less desirable. And I worry that Star Alliance tickets are next…

On the whole, this really does strike me as a program enhancement. Perfect? No. But I’m not going to complain.

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Looking at the chart, does it surprise you that United Airlines announced today that it was increasing its checked baggage fees from $20 to $25 for the first bag? And from $30 to $35 for the second? ($23 and $32, respectively, if you prepay online.)

In the past few days, United has joined Delta, US Airways, and Continental in raising the baggage fees. The United policy goes into effect tomorrow (Thursday, January 14) for flights on or after January 21 within region 1 (North America, Hawaii, Caribbean).

For all the public’s (and my own) bitching and whining about the proliferation of fees, this stock chart really says everything you need to know about why these fees continue to proliferate. Wall Street likes these fees, as they generate a steady stream of revenue. “Free money,” they say. Never mind that the same customers who today are coughing up the money for these fees might be migrating to another carrier (like Southwest) if they can manage it. But Wall Street short-term thinking is what’s driving this. And the increase in these airlines’ stock prices today — that’s the CEOs’ vindication.