There have been some interesting comments in the news today made by Continental’s new CEO, Jeff Smisek.   First, he seems the switch in alliances as a very good thing for Continental but it is way too early for us to see that as anything other than justification for the switch.  It was notable that he referred to being in the SkyTeam partnership as problematic since they felt Delta was trying to kill them.  I’m not sure Delta was trying to kill them but I don’t think Delta saw them as adding value probably. 

Another comment is one I’ve been waiting for from an airline.  Mr. Smisek says Continental will cancel flights before risking fines under the new rules for 3 hour delays.  I’ve been waiting for an airline to make that statement publicly because the rule is about to go into effect but also because the winter weather this year has been atrocious for northeastern airline operations.  No airline likes new rules.  No airline ever embraced a rule that punished its violators with fines.  Even the most progressive of airlines hate change.  But airlines have been relatively quiet for the past 2 months of winter and that made me wonder if I was ever going to hear threats of cancellations.

Well, to my surprise, it was Continental that finally stepped up to the plate.  The thing is, if one looks at what winter did to airline operations so far this eyar, any flights that got cancelled would have had to be cancelled anyway.  There might have been a handful that could have gotten off if given 4 hours instead of 3 but it would have literally been a handful.  What has been notable is just how quickly and quietly the airlines recovered their operations after each event.  No outraged passengers were found on the news complaining either. 

The airlines were all negatively impacted by the storms and all lost a significant amount of revenue because of that.  It was unavoidable and it wasn’t because of the 3 hour rule looming in front of them.  That’s how the airline business rolls sometimes.

The final notable comment is comes from Continental reiterating that it may be open to a merger in the future.  They don’t see the Delta/Northwest merger as being in the books as a success yet and I agree.  They do, however, believe that if that merger does prove successful, it points to what Continental needs to consider in the future.  I don’t see this happening any time soon at all.  The truth is, Delta got the best partner available in the US.  The next 2 candidates come with a lot of baggage that isn’t easily solved by even in the best managers in the industry:  United and US Airways. 

I think we’ll see Continental exploit its membership in the Star Alliance and grow itself organically rather than by merger.  There is one company that, if I were Continental, I would be interested in buying.  Alaska Airlines.  The problem is, if they make a move on Alaska, it will become a bidding war between AA, Delta and Continental.   Maybe United even enter into that fight.  Continental doesn’t have the war chest to win that fight.  Not right now.  If they do recover and re-start their growth and if Delta’s merger doesn’t prove as successful as it hopes, they would have a chance.  Even at that, I think AA would fight very, very hard to win that battle just to keep Continental off the west coast.

Filed under: Airline News by ajax