Courtesy of unitedcontinentalmerger.com

The management teams of United Airlines and Continental Airlines have never seen eye to eye when it comes to customer loyalty, and that seems to be causing trouble during their merger preparations. My inside sources tell me that Continental executives don’t quite understand United’s big emphasis on loyalty in recent years.

It also appears that Jeff Foland, who last week was named head of the combined carrier’s frequent-flier program, Mileage Plus, will have a tough job selling United’s current philosophy to his new bosses in the Continental team, which will run the company once the merger is completed, most likely around year’s end.

Even though Foland, who has been United’s senior vice president for worldwide sales and marketing since 2006, didn’t have a direct formal role in Mileage Plus’ decision-making, he is said to be greatly influenced by the way his current superiors and colleagues do business. After all, his entire short career in the airline industry has been spent at United.

In addition, all United call centers, including the only remaining Mileage Plus center in Rapid City, SD, reported to Foland, so he is no stranger to the recent drive to turn the program into a profitable business.

Foland will succeed Graham Atkinson, the outgoing Mileage Plus president, who used to have Foland’s present job. As I wrote in February, Atkinson is responsible for changing United’s overall approach to loyalty by proving that what’s good for customers doesn’t necessarily have to be bad for the company.

Most of the changes he made in less than two years on the job have been welcomed as major improvements by Mileage Plus members, including the introduction of one-way awards and eliminating so-called close-in fees, charged when an award ticket is issued less than three weeks before a trip. The attention Atkinson has paid to customer feedback and the degree to which he has acted on that feedback are extremely rare, if not unprecedented, in any customer-service-driven industry.

The bottom line for the company is that, by making and keeping its most loyal customers happy, Atkinson turned Mileage Plus into a money-making business. The bottom line for customers is that Mileage Plus today is probably the best program in the industry, with the notable exception of StarNet blocking. Hopefully, the practice of massively blocking award seats otherwise made available for mileage redemption by United’s partners in the global Star Alliance will soon be on its way out.

It’s no secret that Continental’s priorities have lied elsewhere under Jeff Smisek, its chairman, president and CEO, who will be CEO of the combined airline. Smisek has won much praise for his management style, which has helped the company’s finances during a tough period and significantly improved both its hard and soft products. Continental has chosen to lure passengers in its premium cabins by lowering business-class fares, while United has kept those fares high, resulting in more upgrades for elite customers.

Although that choice has its merits, Continental’s OnePass is hardly a leading loyalty program. There is nothing wrong with trying to attract more paying business-class passengers, but in the current environment, a strong upgrade product would go a long way to securing long-term customers.

United has that product, and so does American Airlines, United’s main competitor. Even though Mileage Plus and OnePass have aligned some of their features, they remain apart in many respects — and most importantly, in their business philosophies. Hopefully, the unpleasant prospect of losing customers to American will prevent the merged carrier’s management from curtailing the more significant benefits in Mileage Plus compared to OnePass.

Related stories:

Flying new United route — rare occurrence

United’s ‘award’ blocking an issue in Continental merger

United executive breaks old barriers

Customers gain sway over airlines

Continental shows new transparency



4 Responses to United, Continental execs at odds over loyalty program

  1. John Ingwersen says:

    I was Platinum on CO until I got sick of their restrictions on saver awards, even for elite level. I already see the same thing happening to United since the merger. I am not happy. Aside from lousy seat pitch in coach, CO generally had a better product than UA, but I agree, in a pinch UA always took better care of its elite folks. Having more than 2 million combined miles on CO/UA, I think I know the difference, and if the current trends continue I will be looking to DL or AA to see if they can do better. The new UA had better be darn careful.

  2. Katharine Janower says:

    Beneficial post, I enjoyed it very much.

  3. Seth, Continental’s long-haul fleet is tiny — there are more 757s being used for long haul than there are 777s and 767s, and the -200s have only 25 premium seats. So that means that CO has 16 premium seats on the majority of their “long-haul” fleet, 25 on their 767-200s. So they definitely don’t deserve a medal for selling premium seats, that’s easy.

    Yes, CO has run a good business on U.S. domestic since Gordon took over, but being a small challenger is a lot different from competing against the biggest. Those SWUs you will be receiving are not worth much because CO (along with all other carriers) is able to sell 16 BF seats on international flights.

    To claim that CO sells all their premium seats is a myth at best. And COs fares are not more expensive than UA; they are pretty equal. Actually, lately UA has been very expensive, is making money and planes are full. CO can’t claim to have a premium product both in the back and front. With food in coach going away, CO is just another US domestic carrier with clean planes, but world champions on nickel and diming everyone, including elites. Jeff’s FilmSpot is not like Larry’s. It’s not important to him to be best, but equal to the competition. Not a winning recipe in my book.

    Being a CO Platinum myself, as well as a UA 1K, I can name the weaknesses and strengths.

    A real top-tier level that gives top-tier treatment, totally immune to COs nickel and diming. Dedicated agents who actually help. Free upgrades has been CO’s way for years, while UA has required 500 milers to upgrade. Now they are about equal, but 1Ks has a get-out-of-jail-free card: CR1s. Economy Plus is also a major factor elites choose UA. If you don’t get your upgrade or you change flights, you will still be comfortable, contrary to CO who has LLC seat pitch. You can also upgrade your spouse or travel companion on the same itinerary — impossible on CO.

    The most important: UA is best in class when something goes wrong. Elites are taken care of while CO will leave their best customers hanging and refuse to set things straight when things go wrong. Absolutely unacceptable. I have 4 incidents the last years, unbelievable stories that is a disgrace for CO.

    UAs weaknesses: StarNet blocking and no booze in the clubs — that’s it.

    So in my book, I forgive Graham for StarNet blocking, and I’m actually sad to see him go. Hope Robert stays and that the (N)one Pass management and Jeff will listen to the MP folks. It’s the best part of United and to compete with AA and DL, only MP and great customer service for elites will win.

  4. Seth Miller says:

    What is OnePass missing that makes it “hardly a leading loyalty program?” SWUs? Those will be here in less than 4 weeks. And can you honestly say that it is better for an airline to give away F seats than to sell them? I guess so if you want to always fly up front for pennies but that is not a reasonable expectation for the survivability of the company, and I’d much rather have a company that is still in business in 3 years so I can actually redeem the miles I’ve accumulated than have a couple more upgrades on a flight to Florida this week and nothing next month.

    What does OnePass do better than UA and AA? Routing flexibility on award itineraries is a good place to start. Ditto for no StarNet blocking. Considering that you’ve actually excoriated UA in the past for that policy and they still haven’t changed it I wonder how Mileage Plus is so customer friendly and better.

    In the end, each person will have different reasons to love what they do about their program of choice. For me, upgrades are not the holy grail, award travel is. And OnePass is miles ahead of Mileage Plus in that arena.

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