Airlines and Continental Airlines are combining operations in a $3-billion
merger, forming the world’s largest airline.
The deal is the culmination of a lengthy search by United CEO Glenn Tilton for
a partner that would bolster his carrier’s global network and promote consolidation
in a fragmented industry plagued by chronic losses.
The combined airline would have annual revenue of $29 billion, based on 2009
results, and hold an unrestricted cash balance of about $7.4 billion. The
carriers said in a press release they expected to complete the transaction in
the fourth quarter of 2010.
Continental Chief Executive Jeff Smisek will be named CEO of the new carrier,
while Tilton will move to its board as non-executive chairman for a two-year
term. The new airline, to be named United, will retain its world headquarters
in Chicago, where United currently employs about 700 people.
Its aircraft will
bear Continental’s globe logo on the tail and be painted in the Houston-based
carrier’s colours. And it will be unveiled to customers with a new campaign,
“Let’s Fly Together.”
Unlike the earlier merger that United had contemplated with US Airways, this
deal isn’t expected to involve large-scale cuts since United’s and Continental’s
networks have little overlap. The carriers expect to continue serving the 370
cities where United or Continental currently fly and will operate 10 hubs,
including bases in the four largest cities in the U.S.
Executives hope that linking Continental’s strong Latin American and European
routes to United’s connections in Asia will generate a surge of new
international traffic and revenues.
Executives expect to save $200 million to $300 million annually by 2013 by
reducing overhead and overlapping administrative functions. The carriers said
the effect on front-line workers would be minimal, with job cuts coming primarily
from retirement, attrition and voluntary exits.