Continental's new alliance ends BA talks

Old Jun 20, 08, 6:08 am
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Continental's new alliance ends BA talks

Continental Airlines is to join the Star Alliance, bringing talks for possible co-operation with British Airways to an end.

BA announced discussions with Continental and American Airlines (AA) in April. It will continue to explore opportunities with AA.

Chief executive Willie Walsh said: "The talks with Continental and AA were set up to discuss the possibility of co-operation for all three airlines. Continental has concluded that their plans to partner United Airlines and join the Star Alliance will provide new opportunities for their customers.

"We already have a close relationship with AA and our talks with them about possible co-operation are ongoing. We will say more when it is appropriate to do so."
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Old Jun 20, 08, 7:42 am
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It would have been little value to Continental to have joined up with OneWorld, as their network based principally at Houston Texas, Cleveland in the Midwest and Newark in Greater NYC is extensively duplicated by American who also have nearby hubs at Dallas, Chicago and JFK. Star Alliance on the other hand have nothing in Texas and surprisingly little presence by either United or US in New York City.

Presumably Continental, who must have been in mid-invest for new facilities at Heathrow T4, will now be starting again over at T1.
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Old Jun 20, 08, 8:15 am
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Originally Posted by WHBM View Post
It would have been little value to Continental to have joined up with OneWorld, as their network based principally at Houston Texas, Cleveland in the Midwest and Newark in Greater NYC is extensively duplicated by American who also have nearby hubs at Dallas, Chicago and JFK. Star Alliance on the other hand have nothing in Texas and surprisingly little presence by either United or US in New York City.
It depends on your objective. The US 'legacy' carriers are in the process of cutting 10-15% of their total capacity, though proportionately more domestic services because they need to find a new level at which they can match seats they can sell with the fares they need for profitability with oil over $100 a barrel. My guess based on very little is that even this will not be enough and they probably need to cut 20-25% of capacity since folks like Southwest are still profitable and won't be cutting anything.

The problem for a network carrier is if you have, say, 5 services a day between a city pair and you take out 2 of these the service becomes much less attractive and you run the risk of the volume falling off even faster, however if you collaborate (ie codeshare) with another carrier running almost identical routes who also has 5 services a day, you continue to offer the service and can be more aggressive about chopping capacity. That approach would have made a match between AA & CO very much more attractive than CO almost but not quite merging with UA.

Based on what's happening I wonder if CO is lining up to cherry pick the pieces of UA it wants when the almost inevitable bankruptcy strikes. Amongst other things I wouldn't be surprised to see CO walk away with a bunch of Asian route authorites, maybe the SFO hub, widebody aircraft and crews to operate them.
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