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United & Continental Airlines Expected To Merge; Will Be Worlds Largest Airline


United and Continental Airlines are expected to announce Monday that they are combining operations to create the world’s largest airline, the culmination of more than a decade’s effort by Chicago-based United to strike a megamerger that would transform the U.S. airline industry.

The transaction, which must still be approved by both airlines’ boards, would be structured as a merger of equals, with neither side paying a premium for the other’s stock, according to sources close to the talks.

The new airline, to be called United and based in Chicago, sources said, would bring together two carriers whose hubs and routes complement each other, giving management a shot at running a more profitable business in an industry plagued by overcapacity.

United’s board is expected to vote Friday on the deal, which was reached in a flurry of negotiations that lasted less than three weeks. Continental directors are meeting Friday to pore over the proposed transaction and are scheduled to vote Sunday. Representatives for Continental and United declined to comment on the merger.

The Continental and United brands will likely remain in the market until the carrier receives a single operating certificate from the FAA, a process that took the recently merged Delta and Northwest Airlines two years to accomplish.

United and Continental could cut costs and boost revenues by between $1.8 billion and $2.2 billion by formally combining their networks and finances, estimated Vaughn Cordle, an airline analyst and retired United pilot.

(Source: Tribune / WPIX / YWN-112)



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