Indy/San Francisco Flight Ready for Takeoff; Needs Support from Business Travelers

Hoosier business leaders and Indiana travelers will soon be privy to a non-stop flight from Indianapolis to San Francisco on January 8 (and a direct flight already exists en route to Los Angeles). United Flights 317 and 500 (named for Indianapolis’ area code and the Indy 500) will be incredibly convenient to those in many industries.

The Indiana Economic Development Corporation (IEDC) recently wrote:

With over 4,900 seats already reserved, we’re off to a great start, but it’s important to keep that momentum going.  The best way is to simply buy tickets and show your support.

It’s an incredible holiday gift that will certainly bring new opportunities and investment to the Hoosier State, and yet another reason Indiana is a state that works for business.

Indiana Chamber board member Michael Wells, who also serves as president of REI Investments and on the Indianapolis Airport Authority Board, explains the benefits of the flight.

“This will be very helpful for the tech community, like (which recently acquired Indy-based ExactTarget) and others,” he notes. “It also will allow (venture capital groups) to fly into Indy in the evening, conduct business during the next day and catch a good connection back to the West Coast, leaving around 5 p.m. and still arriving at a decent hour due to the time zone.”

Wells adds that the San Francisco flight will serve as a connection to Asia, and connections are set up for convenient transfers for passengers.

TAKE NOTE: However, it’s critical that Indiana travelers and the business community use the flight if it’s to be continued beyond the next year, and the local market will need to prove it can support it. A release from IEDC reports:

The Indiana Economic Development Corporation (IEDC) will provide United Airlines with a minimum revenue guarantee, consistent with industry standards and United’s business model, during the term of the one-year agreement. To accomplish this, the IEDC allocated $1.5 million in a reserve fund, which represents the state’s maximum financial exposure. No payments from the reserve fund will occur as long as the market’s support for the nonstop route equals or exceeds the minimum revenue guarantee.

Air of Teamwork: United & Continental Merge

While it may have been overshadowed by the stock fluctuation fiasco last week, American airlines United and Continental announced a $3 billion merger. Forbes covered the partnership, noting that unlike many mergers, this is more about generating revenue than it is about cutting costs:

Whether it’s airlines, banks or canned food, mergers are usually about cost savings. Eliminate duplication, streamline distribution to the customers and lay people off.

The United-Continental merger? Not so much. This deal is more about chasing revenues by dominating lucrative routes. The combined airline would have hubs in the largest domestic cities, plus an expanded overseas network. So from a standpoint of the pricing power that comes with squeezing competitors at top hubs, the deal makes sense.

What the merger won’t do is advance the big cost-cutting initiative that airlines have been embarking on for the past couple of years–reducing capacity. Airlines are already taking seats out of the sky, with or without merger partners. There are always some duplicative costs that can be cut, but this deal is mainly about revenues.

"When you’re trying to get corporate contracts, and you can say you have the most routes to Europe and that you’re the major airline in New York, Chicago, San Francisco and others, that does a lot," says Seth Kaplan, managing partner at trade publication Airline Weekly. Internationally, United’s strength in the Pacific Rim is complemented by Continental’s South America dominance.

Industry consultant Michael Boyd says, "Cut costs all you want, but the lifeblood of an airline is its revenue stream."

The $3 billion, all-stock deal, will create the world’s largest airline, with some $30 billion in annual revenue. Continental Airlines ( CAL – news – people ) shareholders will get 1.05 shares of stock in United parent UAL ( UAUA – news – people ) for each share of Continental, with the merger expected to close by year-end.

The Obama Justice Department figures to scrutinize the deal more closely than Bush officials did the Delta-Northwest merger, but "It’s hard to imagine any hurdles that can’t be overcome," says Kaplan. It’s also unlikely that the companies’ boards would have approved the deal without feeling confident of minimal objections from the labor unions–an outcome that’s likely given the focus on business growth over cost cuts. The consensus: There will be some labor battles, but no open warfare.

Guitar Smash Turns Into Sour Note for United

Still not sure about this social media thing and how it might have an impact on your business? While there are positive stories (and many more to come), read on about how airline arrogance came back to haunt United — thanks to a video message and blog.

With a smashed $3,500 guitar by United baggage handlers and a frustrating customer experience involving denied resolution, country singer Dave Carroll got innovative.

Thanks to digital production capacity and some remarkable creativity, Carroll and his band put together a finely tuned video message chronicling the debacle. The four-minute and 37-second video subsequently went viral and so far has attracted no less than 4.5 million views on YouTube.

Mashable’s Jennifer Van Grove wrote: “United is [now] feeling the wrath of citizen journalism, the social Web and the millions of airline travelers who can identify with Carroll’s experience.” columnist Michael Snyder of The MEK Group has the full story.