United-Continental would make Chicago home

Posted April 22, 2010 at 5:48 p.m.

United-Con-2-Web.jpgA United Airlines check-in area and a Continental Airlines kiosk at O’Hare International Airport. (AP Photo/Nam Y. Huh)

By Julie Johnsson | United Airlines’ merger talks with Continental Airlines are progressing
rapidly, and many of the key issues involved with melding the carriers have been resolved, said a person close to the talks.

Telephone calls are flying between carriers’ management teams and their directors, and a deal could be completed as soon as next week.

The merged airline, which would be the largest in the world, would be headquartered in Chicago, where United is already based, the person said. Continental CEO Jeff Smisek would be named chief executive of the carriers, while United CEO Glenn Tilton would serve as non-executive chairman.

The carriers reportedly would consummate the deal through a straight stock swap with no market premium, Bloomberg News reported Thursday. Wall Street appears to have anticipated that possibility, since United and Continental shares have been trading in tandem in recent days.

However, US Airways’ announcement Thursday that it would no longer continue merger talks with United could remove some of the urgency from the talks, which have been in high gear for the past week, sources cautioned.

Continental’s board, which had favored a slow integration of the carriers and their joint ventures, could decide to allow additional time to study the deal, now that US Airways is out of the picture.

In a highly unusual move, US Airways announced Thursday that its board had decided to not pursue talks with United.

The statement by US Airways Chairman and CEO Doug Parker signaled the anger and frustration that executives of the Phoenix-based carrier felt toward United. The latter put discussions on hold last week, days ahead of a planned merger announcement, to focus on a potential deal with Continental, say people close to US Airways.

“I am sure some ‘industry experts’ will suggest that US Airways will be strategically harmed if United now chooses to merge with Continental,” Parker said in an April 22 letter to US Airways employees. “They will be wrong…Should our competitors choose to merge and help create a more stable airline industry, our independent airline will only become stronger.”

The rupture between United and US Airways doesn’t mean that they wouldn’t return to the negotiating table at some point in the future, sources said. Phoenix-based US Airways would also be a potential partner for American Airlines, which would fall to a distant third in the U.S. market, should the United-Continental deal be completed.

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  1. Garry April 22, 2010 at 6:43 pm

    If the merged airline moved out of Chicago, it would have repay the city all that TIF money it got to move the HQ from Linneman Rd. in Elk Grove to downtown.

  2. Pete April 22, 2010 at 9:47 pm

    Are you kidding? This is Chicago. Daley wouldn’t make United pay back one dime.

  3. Barry April 22, 2010 at 10:01 pm

    Back in 2008, it was always going to be based in Chicago, called United, and Continental’s CEO running it.

  4. Ben April 22, 2010 at 10:53 pm

    I smell a merger between AMR and US Airways……I like Virgin/Virgin America myself.

  5. Geoff April 22, 2010 at 11:19 pm

    Well Pete and Garry, its a good thing that your comments are irrelevant. I’m glad the HQ would stay here.

  6. Genzero April 22, 2010 at 11:51 pm

    I wonder how much $$$ Smisek is getting for this? I mean, it has always been United who wanted this deal, not Cal and now the Cal CEO is obviously on the verge of selling his team and company down the river (or maybe up the creek, you choose you own verbage) so obviously he has been bought in a big, big way. The players are always bought in these deals to some extent, but this is extreme.

    I wonder how much dirt the media will find when they dig into this, and they will dig. What sane individual would allow a relatively successful airline like Cal to basically be absorbed by a dysfunctional hornets nest like UAL (not my description, that is what I have heard from numerous UAL emps flying through ORD). It really does not add up, even from a purely business standpoint. I mean, if you want to be successful with this, the logical thing would be to have Cal mgmt working with the power network the combination would produce. How can that really happen when 80-90% of Cal’s mgmt (and that might be conservative) will never set foot in Chicago? It simply does not add up.

  7. Carl Walk April 23, 2010 at 10:22 a.m.

    We at CAL would be buying United. UAL doesn’t have enough money to pay its fuel bill each month. Trust me, NONE of us at CAL want this to go through !

  8. thom a April 23, 2010 at 11:00 a.m.

    just a couple of facts. prices for flight have been coming down and profits rising at airlines. planes are fuller because more have been removed from service. Lines are longer, services are fewer and things like baggage are more expensive. Basically flying is less attractive and more ugly than ever before.
    To make greater profits, a merger requires lots of legal expense, accounting, payoffs to “golden parachute” executives and is a multi-million or billion dollar action. To recover this cost that mainly profits a few but not a single consumer, staff must be cut by combining activities formerly done separately. Combining flights that restrict options, and raising fees and rates by controlling more availability to flight schedules. Fewer airlines mean it is easier to collude to raise prices with on airline raising as a leader to start the others following and take turns. This breach of anti-trust laws and creation of “too big to fail” companies requires tax payers to subsidize the next big crashes in bail outs. The government has consistently shirked its responsibility to avoid these consumer negative actions by using existing law to maintain free enterprise and avoid economic dictatorship. It is classically un-American and illegal but, big allows large graft and buys lots of politicians. Hold your nose and watch it happen anyway.

  9. SL April 23, 2010 at 11:32 a.m.

    My dislike is very strong for United as a corporate entity and employer (re: friends, family who have worked for them) for a variety of reasons I will not get into. Personally, I’d like to see the name and management go away(do not give Tilton a retention bonus/parachute) and let Continental run the game from Newark or Houston, if this must happen at all!

  10. CAL reserve April 23, 2010 at 4:59 pm

    Agreed! Our service will only go down after this- it’s already stepped down with Smisek in charge.

  11. CAL April 23, 2010 at 8:21 pm

    For lack ofa better word this really sucks, im part of the CAL team and i can say that is a sad day in history when CAL officially announces the merger. WE new that Smisek was the end of the company and all that he was here for was to merger a great company with a dying legacy that cant afford its cost anymore. Further more we Chicago is worst in its ontime that any of the tri-state airports. It really is a shame that they are trying to keep everything on the download and keeping there employees out of the loop, affecting our jobs and most likely leaving us without a job. This is why Larry wanted nothing to do with this, and left the company. Since Smisek came he made horrible changes and we new it was the end when it was announce that we would be charging for meals, we were little by little becoming UAL. Now were going to be part of them.

  12. Hugh April 24, 2010 at 2:33 a.m.

    I am addressing the comment made by the writer who stated the “UAL is a dysfunctional hornets nest” but this was not her discription, it was made by UAL employees in ORD. I must inform you that NO UAL EMPLOYEE WOULD HAVE MADE SUCH A COMMENT TO YOU, you are just trying to keep your hands clean. Yes we may have certain issues with management but certainly not a hornet nest, get your facts together before you start slandering. It’s quite obvious if CAL choose to start selling meals, they must be in a financial crunch. The airline industry is a competitive business, they each copy and follow suit to reach their goal, your CEO chose to sell meals because he saw it was fianacially lucrative for the company. Thank GOD you were not chosen to be the CEO because CAL would non-existance.

  13. CAL ORD April 24, 2010 at 9:27 a.m.

    Hugh, you are very incorrect in your statement that “NO UAL EMPLOYEE WOULD HAVE MADE SUCH A STATEMENT”
    I am very close to several UA employees and have attended functions where other UA employees have came up to me and stated exactly what you said no ual employee ever would, and that is of course that UA IS a hornets nest, or as one UA employee (an airport agent) said “its become nothing more then a poisonous snake infested workplace where the only thing that all employee groups have in common is their great mistrust in all levels of UA management”, there were 2 pilots, a flight attendant, and another airport agent nearby and ALL of them nodded their heads in agreement.