Why Continental Airlines did the right thing

After months of speculations, Continental Airline representatives have officially stated that they will not be merging with United Airlines. Everybody knows that fuel prices are going up while the economy is going down. Airline carriers in the US are feeling the pinch of hard times. Delta Airlines has agreed to unite with Northwest Airlines making them the largest international carrier in the world (which doesn’t necessarily equate to being the best –some say the best is Qantas, I go for Emirates).

Given the dire situation of fuel, the best move for any airline is to merge to offset costs. So did Continental make a mistake by not merging? Hell no. Despite the fact that they may encounter financial problems due to the economy, not merging with United is one of the best decisions Continental has made.
Let’s face it – United Airlines has been going to the dumps even before 911. Why else was there terrorist pilots flying their planes? Because of 911, customers are afraid to fly their planes. I mean granted that they may have tightened up their security, but hey, after witnessing 911, watching the movies about it, who wouldn’t be scared of United. Plus, their service is not all that great.

Moreover, United Airlines has been re-trenching and closing their offices left right and center. Most of the jobs are going out of the country and into Asian countries like the Philippines and India. I have nothing against that. That is after all globalization, but there is something lost in translation.
Unites Airlines’ situation is so bad that they continue to lose money. For the first quarter of this year, they have lost $537 million and have also announced cutting another 1,100 jobs.

Now, is it really wise to merge with a company that is having a hard time keeping itself up? Like the Continental spokesman said, “Do you really want to swim out to a drowning man and just get pulled down with them?”

Now it is significant to know that if Continental and United actually merged they would have beaten the Delta-Northwest union in size. It is also a known fact that Northwest has golden shares in Continental giving them the right to veto any merger that occurs with Continental. Delta buying Northwest is a very significant move in the industry as it changes the dynamics in the industry as well as make competition far steeper. This is so because, Delta, which will own the shares of Northwest in Continental will have a say on Continental activities.

So did Delta and Northwest have a hand in stopping Continental from merging with United? Surely. But whether or not they did have hand still makes the non-merger a good move. Now speculations are going on with an alliance, not a merger, between Continental and American Airlines….will it happen? How would that change the landscape of the carrier industry? How will United survive with no one wanting to merge?

United Airlines will eventually find someone else… good luck to that airline….