Regional partners like Colgan (ExpressJet, Chataqua, CommutAir, etc.) are the source of many complaints and much confusion to the traveling public. Although they bear the livery of the company that they fly for, in this case Continental, they are separate companies with their own policies and procedures. Although Continental enters into agreements with these regional carriers and expects it's customers to treated in a certain way, this is not always the case.
Whenever you see the words "operated by..." printed on your itinerary or confirmation, always check into these companies. Their history of complaints with the DOT will be recorded separately from the airline who sold you the ticket. If you have a complaint about one of these regional carriers go directly to that carrier or the DOT. Calling, writing or e-mailing the big airline is a waste of time as they will only forward that letter or e-mail to the regional anyway.
In your case, countrynewsman, the Colgan agent you dealt with at the airport most likely didn't have the authority to re-book you into 1st class on the Continental mainline flight and in all probabilty wasn't trained to know how to sell you seats on that flight and charge you the difference. Definitely training they should have but because of Colgan they do not. As for the reference to Rule 240, it doesn't surprise me that they had no knowledge of that either, however Rule 240 is about re-booking to a different airline. The only others out of Kileen are AA (Eagle) and DL (ASA) who fly similar sized aircraft. Perhaps they were full as well? Also, were you going to Ontario, CA or Ontario Canada? If it was Canada they probably wouldn't touch that reservation with a 10 foot pole anyway!
Even though you made it to your destination and now sound like you're reasonably happy, I would take the time to write to Colgan and CC to Continental that you found the agents working in Killeen to be lacking the training and skills to effectively handle customers during irregular operations.
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