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Originally published December 28, 2011 at 6:06 PM | Page modified December 28, 2011 at 7:30 PM

Big challenges for United Continental in 2012

While 2012 is likely to feature a variety of dramatic airline news stories, if only because most years in the volatile industry beget drama, some of the biggest developments will come from the world's largest airline, United Continental.

Chicago Tribune

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While 2012 is likely to feature a variety of dramatic airline news stories, if only because most years in the volatile and hypercompetitive industry beget drama, some of the biggest developments will come from the world's largest airline, United Continental Holdings.

Behind the scenes, the Chicago company will attempt to merge United's and Continental's reservation computer systems, a huge and perilous undertaking. It will also be the first North American airline to take delivery of the Boeing 787 Dreamliner, considered a game-changing aircraft for fuel efficiency and passenger comfort.

Perhaps most important, the company will roll up its sleeves and try to hammer out labor contracts with several of its unions, including the feisty pilots union that has been highly critical of the airline in recent months.

Developments elsewhere in the industry will include American Airlines making its way through bankruptcy protection, potentially cutting more service.

There's also the little matter of the sluggish U.S. and world economies, which directly affect the industry's fate.

The first changes United customers might notice will occur when the company combines its reservation systems. That change will come in the first quarter of 2012. After the switch, Continental.com will go away. But airline officials chose to stick with Continental's brand of booking software, called SHARES, sold by Hewlett-Packard.

"That's a very big deal for us because it will make the customer experience better than it is today," said United Chief Executive Jeff Smisek, who has called United Continental "a technology company with wings."

United Continental in 2012 is scheduled to be the first North American airline to take delivery of a Boeing 787 Dreamliner, a twin-aisle plane that offers the best fuel economy and range for a craft its size and promises passengers far greater comfort.

Smisek has called it a "truly game-changing aircraft." It's expected to be in service during the second half of the year, and, all told, United expects to receive six 787s from Boeing in 2012.

"It will be the only U.S. airline flying them for a long time to come," said Airline Weekly managing partner Seth Kaplan.

Specifically, United claims it will be three years before the competition in North America has a Dreamliner. Boeing delivered the first 787 this year to Japan's All Nippon Airways.

If it lives up to expectations, the Dreamliner would burn 20 percent less fuel than other midsize jets but boast the range of far larger aircraft. It would enable carriers to bypass airport hubs and directly connect city pairs that otherwise wouldn't generate enough passenger traffic to fill bigger jets.

For passengers, the plane has the industry's largest windows and overhead bins. Quieter and smoother-riding, the aircraft has wider aisles and seats, lower cabin pressure and cleaner air.

Perhaps the biggest challenge for United next year will be successfully negotiating labor contracts with its various unions, including pilots, flight attendants, mechanics, passenger service agents and ramp agents.

The most difficult, and most costly, will likely be the pilots contract. The two sides have been negotiating for more than a year. Pilots, looking to recoup pay and benefits they lost in United's bankruptcy from 2002 to 2006, have regularly staged informational pickets about not having a new contract.

The Air Line Pilots Association filed a federal lawsuit against United, complaining about poor cockpit training, although labor officials said the suit was about safety, not their labor contract. The union lost that suit.

"I certainly wouldn't bet a lot of money on it getting done in 2012," Kaplan said of the pilots contract. "They certainly don't seem any closer now than when the companies merged. If anything, they seem further apart."

CEO Smisek said the company wants to seal deals with all the unions, including pilots.

US Airways hasn't reached that point. It merged with America West Airlines more than six years ago and still hasn't struck a joint deal with the pilots union.

"There's precedent for these things getting really drawn out," Kaplan said. "What US Airways has shown is it's possible to run an airline without getting the groups together."

The recent bankruptcy of American Airlines, which is likely to see the airline significantly lower its labor costs, could also have an effect on United's stance with unions.

"United might be in a position to say to its workers, 'Look, we just can't give you what you're asking because that would make us totally uncompetitive against this important competitor that now has much lower costs,' " Kaplan said.

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