So United and Continental got an unconditional green light from the European Union to merge their operations. This was hardly a surprise — the antitrust review by the U.S. government is far more relevant, given the greater domestic competition between the currently-separate carriers.

It’s not clear if it’s coincidence or providence, but United is “celebrating” by offering a free alcoholic beverage to each passenger in Economy Plus from August 6 to 16.

But don’t let the free drinks distract you. The real issue is the merger going forward, and what that means for customers. And while there are no concrete changes being announced, there are telegraphed changes through the shifts in the management lineup.

While the Continental CEO will be at the helm of the combined firm, the frequent flier program will be managed by a United executive. United execs also take the COO and CIO position. (I just hope that the CIO adopts more of continental.com than united.com…)

So, in all likelihood, the mileage program will look more like MileagePlus than OnePass. Gary Leff has speculated some on the direction that the program will take under the merged airline, and I agree fully with his assessments. Most importantly, during a transition period immediately following merger, the two programs will likely feature the best of both worlds.

Check out Gary’s comments for a glimpse into what will likely happen on the mileage front.

(image)

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: Catastrophe Management
SNCF, the national railway of France, publicly posted that 104 passengers had died in an explosion of the high-speed TGV. Thankfully, the news was false — completely fabricated, as an internal crisis management simulation. But alas, the test went awry, and the notice actually hit the newswires.

Downgraded: Meals on Continental
Continental Airlines has finally thrown in the towel and is giving up the free meals in coach. Instead, they’re instituting a buy-on-board program. Maybe I’m suffering from Stockholm Syndrome, and I’ve become assimilated by my airline captors, but this doesn’t bother me much. Yes, it’s the end of an era. But I’ve moved on. So have others. The problem, for me, is that Continental is taking another page from its colleagues in the industry and spinning the removal of an existing amenity as an upgrade.

Upgraded: Flight Attendants’ Demands
Flight attendants, represented by the Association of Flight Attendants, want training in hand-to-hand combat. I think they’re right. Other demands: portable communication devices for speaking to the pilots (makes sense); standardized (read: smaller) carry-on sizes, “so that flight attendants can look for suspicious passengers instead of struggling with oversized bags” (makes sense, but let’s not go Ryanair on sizing); shutting down onboard wi-fi during periods of “high threat” (this is particularly subject to abuse).

Upgraded: Airline Seat Ratings in Brazil
The Brazilian government is taking an interesting and unusual step: requiring airlines to grade their legroom for their aircraft. It’s like an officially-sanctioned SeatGuru, without the specific-seat-level unit of analysis.

Downgraded: Aircraft Air
This is not particularly comforting: 1 in 2000 flights has a “fume event,” which often involves the intrusion of contaminated air into the cabin. In a recent incident, engine oil seeped improperly, was vaporized, and spread through the cabin. Tricresyl phosphate in the oil can cause neurological damage. Awesome.

Upgraded: Wine you can bring onboard a flight
It’s not the original intent of winemakers, and I’m sure the airline industry doesn’t advocate this, but 50ml wine sample bottles may soon be put into regular production. 50ml? 50ml is certainly below the TSA’s 100ml cutoff…

Downgraded: Continental exit row seats
Starting March 17, exit row seats will cost you extra money, unless you’re a Continental OnePass elite member. (United elites get it for free eventually, too, but not yet.) No big surprise, given the industry as a whole. But as David Jonas argues, this is actually a meaningful shift by Continental, whose management had been more resistant than other airlines’ leadership to charge fees for things that were previously free.

Downgraded: Luggage scanning at Denver
For a few days, thousands of checked bags were not scanned by TSA at Denver. No further comment.

Upgraded: All-you-can-drive toll payments for Bay Area rental cars
If you’re renting a car in the Bay Area from Dollar or Thrifty, you’ll be able to buy a “Pass 24″ add-on for $9.95 per day or $39.95 per week (5-7 days) that includes unlimited use of all tolls in the region. The service is run by Rent-a-Toll. I guess it’s a deal if you’re crossing a lot of bridges. Just be sure to use the FasTrak lanes.

(image)

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.

When you get your boarding pass, regardless of when or where, check the name.

Septuagenarian comedienne Joan Rivers got stuck in Costa Rica, blaming the Continental gate agent in Costa Rica for being “an idiot, a moron,” for not letting her on the plane. In an interview with Larry King (another septuagenarian!) on CNN, Rivers implied that the name on her passport (“Rosenberg, aka Rivers”) caused her problems. And CNN ran tickers asking “Joan Rivers: A Security Threat?” Oy. But as the interview proceeds, it’s clear that the dual name on the passport was never a problem.

Rather, she had someone else’s boarding pass. Instead of “Joan,” it was “Joseph.” And when the vigilant gate agent compared the boarding pass to the passport, there was a problem.

Granted, Rivers (or Rosenberg) has a point that there were other points along the way when this could have been caught. At the check-in counter. Or at security. But if I dare use a phrase that’s gotten others into trouble of late, “the system worked.” The gate agent was there to do a final check, and she caught it. She was right to raise a flag, especially given the hypersensitive security environment we’re in.

Should Rivers have been stranded in Costa Rica? Probably not. I’m sure there is some way the airline could have handled this in a way that didn’t create a ruckus, and that verified that Joan, not Joseph, should have been traveling. But I am not privy to the details of her ticket PNR.

The bottom line, and the lesson here: Check the name on your boarding pass. Mistakes happen. And you don’t want to be caught at the gate, trying to fix it. Check the documents as soon as you receive them, and verify things immediately.

Here’s the whole insufferable interview, if you feel like torturing yourself. Masochistic? Well, alright: Around 2:19 is where she is asked about the name on the boarding pass.