United deal would be reward plus

Frequent-flier miles would combine with more choices offered

May 25, 2000|By Amanda J. Crawford

Here are answers to common questions about the proposed United-US Airways deal:

What will happen to frequent-flier miles?

Mileage under both airlines' programs may be combined into United's Mileage Plus program. That means US Airways members will have access to United's broader program, which allows users to redeem those miles on 22 other airlines, including Delta and carriers in Europe, Asia and Latin America.

They will also be able accumulate frequent-flier miles through purchases with United's many non-airline partners, such as Safeway, MCI and E*trade. It is unclear how United will handle US Airways' alliances with other airlines, including American and Northwestern once the programs are consolidated.

One major difference in the two programs is that points in United's Mileage Plus program can expire after three years if there is no account activity, such as added miles through purchases or flights. US Airways miles accumulated before this year never expired.

Will the US Airways name be retained for any planes or services? How about MetroJet?

US Airways' facilities, routes, equipment and personnel will operate under the United Airlines name if the merger is completed. No final decisions have been made for the name of US Airways' shuttle service or its discount MetroJet service.

Will there be an increase in prices?

United has said that it will not increase domestic fare prices for two years after the proposed erger closes. But it has left itself a loophole to account for fuel costs and inflation.

In addition, airlines constantly juggle the number of seats they sell at different prices for the same flight - a process known as yield management.

The impact on pricing will be a major focus of regulators.

What will be the effect on competitors?

The merger will force competing airlines to up the ante in order to compete. This means closing gaps in their services, through increased flights or alliances with other carriers. If federal regulators approve the deal, it is very likely that there will be further consolidation within the industry.

Should passengers expect changes in their flights after the completion of the deal?

While United has not yet made any definite decisions, it is likely that it will reconfigure US Airways' planes to fit into its Economy plus program, which offers increased legroom to certain passengers.

Also, there could be some initial problems with service as the airlines are integrated, particularly if there is union dissent. In the long-run, though, the combined company would offer passengers more destinations and flights,

What does the merger mean for employees?

United has said it intends to honor all labor agreements and does not anticipate any layoffs. But union groups have already expressed concern about the agreement. Pilots, particularly, are concerned about the integration of the seniority lists at the two companies. Similar union concerns halted consideration of a merger between the two companies in 1995.

Explain United's ownership structure

United is 55 percent employee owned. In exchange for some wage concessions in 1994, the airline offered an Employee Stock Ownership Plan (ESOP) under which employees received part of their compensation in stock when they leave the company or retire. That agreement expired in April for some employees and will end in July for others. Consequently, the percent of employee ownership will decrease in coming years as employees leave the company or retire.

What does the merger mean for travel agents?

United has said that it will not reduce domestic standard base commission rates for travel agents for two years after the completion of a merger. It has made no similar guarantee for commissions from international flights.

Is this deal good for stockholders?

The deal is very good for US Airways stockholders. Since the announcement, in which United offered to pay a premium of 130 percent for US Airways shares, stock prices have nearly doubled.

In the short-term, the deal is not as good for United shareholders because the company will absorb a lot of debt. But the agreement will form the dominant industry player, which will eventually benefit shareholders.

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