Monday, May 03, 2010

Continental to Become United

With today's announcement that Continental Airlines and United Airlines plan to merge into the world's largest airline in a $3 billion stock-swap deal, the once-golden Continental brand will become history and Houston will lose its hometown airline.

I'm surprised Continental wants to become United. While none of the U.S. legacy carriers have a particularly good reputation, Continental's is the best of a lousy lot. On the other hand, United is a more established quantity in Asia and the Pacific.

Continental/United will likely close its Cleveland hub because it will be redundant so close to United's hub at Chicago O'Hare. Although United's hub at Washington Dulles is cumbersome and not far from Continental's hub at Newark, I imagine it will remain a hub in some form. United just started a new flight from Dulles to Bahrain last month and service to Accra, Ghana begins in June.

As for Houston, the former Continental will shed front-office jobs and the city will lose prestige of being home base for an airline, but Continental/United's hub at Intercontinental will continue to thrive. One area where the combined airline will continue to be weak is the Southeastern U.S. since United shut down its Miami hub in 2004.

So why is Continental/United moving its headquarters from the Sunbelt? Maybe the Windy City's $35 million tax incentive financing package to get United to move into the 110-story What You Talkin' 'Bout Willis Tower has something to do with it. Houston may be better off in the long run for not having decimated its tax base by trying to match such a generous exercise in corporate welfare.

And by the way, the new logo sucks contrails.

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