United, Continental Set Frequent-Flier Merger

BOSTON (MarketWatch) ‘ One of the last major phases of the merger of United and Continental airlines goes into effect on Saturday, with the integration of Continental's OnePass frequent-flier program into United's new MileagePlus program.

According to travel experts, customers shouldn't see any jarring changes as the parent United Continental Holdings Inc. (UAL) has been gradually tweaking both programs over the past year so that they more closely resemble one another.

“When these mergers occur, people always say, 'How are you going to hose me?' ” joked Rick Seaney, chief executive of travel site FareCompare.com. “So United pretty much said they were going to take the best parts out of both programs.”

Frequent fliers who have been members of both Continental's OnePass and United's old Premier programs will also see a one-time windfall when all their miles are combined into one account, accelerating their eligibility for perks like free tickets.

“In theory, they're also gaining value because they're gaining extended reach within their network‘they'll have more destinations,” Seaney said.

The consolidation of two accounts may have give customers more access to benefits, but there could be limitations to that scenario.

“On the one hand, presumably with a larger network and the combined hubs, you'll be able to connect through hubs easier and go to more places using your miles,” George Hobica, founder of Airfarewatchdog.com, said in comments via email. “Plus, if you had just 15,000 miles in Continental and 10,000 in United‘not enough for a free ticket‘now you have 25,000 miles, enough for a free ticket.”

“On the other hand,” he added, “since more people will have more combined miles, it might be harder to spend those miles.” Hobica added.

Other customers will notice a few changes in certain procedures or benefits. United decided to adopt the look and feel of Continental's website, using the address www.united.com. The site was expected to be offline for at least part of Saturday to allow the transition to be completed.

According to Tim Winship, publisher of FrequentFlier.com, United MileagePlus members who try to upgrade seats on international flights will have to shoulder their “copay” at the time of request, rather than when the upgraded seat is actually confirmed. If the upgraded seat isn't confirmed, the co-payment will be refunded.

Saturday will also mark the institution of a newly revamped Elite program, which grants additional perks and services to high-mileage fliers.

Winship says lower-echelon Elite members will see a slight sweetening in their benefits. Upper-tier members, who rack up the most miles, will see little change.

United spokesman Rahsaan Johnson said that some Continental OnePass members should find booking upgrades easier. Under the previous programs, in certain cases, Continental members had to call the reservations desk to reserve an upgrade. After Saturday, those customers will be able to make upgrades online, like their United counterparts.

Johnson said that the company won't release details about how much the program integration would cost, but said it probably would be accounted for as merger-related costs.

Another change will deal with the expiration of miles. Under MileagePlus, miles expire within 18 months. According to Winship, while the OnePass program technically said it could extinguish miles after a period for nonuse, that policy was rarely enforced. United's old Premier program, in comparison, expired the miles after three years.

By letting miles expire, airlines don't have to carry them on their balance sheets long term. Delta Air Lines Inc. (DAL) , now the world's largest carrier, recently became the main exception to that rule with its decision to end expirations.

But Winship said United's new expiration policy shouldn't be an issue for most passengers, as they can easily keep their miles “active” or gain more miles by doing transactions with the myriad business partners that are included in the MileagePlus program, which is one of the most extensive in the industry.

“There are literally hundreds of retailers, financial institutions, car-rental agencies, hotels, and so on, available,” said Winship. “There's very little, short of breathing, you can't earn miles for.”

Frequent-flier programs are a financial boon to airlines, generating more than $1 billion a year for the largest carriers, according to Winship. And seats that are given away to members would generally otherwise go unused, as airlines tend to book only about 80% of their seats per flight.

“We call them 'frequent flier' programs, but they're really 'frequent buyer' programs,” said Winship. “They add significant top-line revenue to the airlines.”