The new paint job planned for United Airlines planes after the merger. (United handout)
By Julie Johnsson | United Airlines and Continental Airlines announced early Monday morning
that they are combining operations to form the world’s largest airline
in a $3 billion merger.
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 that would promote consolidation in a badly fragmented industry
plagued by chronic losses. Continental CEO 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
at 77 W. Wacker Drive in Chicago, where United currently employs about
700 people.
Its aircraft will bear Continental’s global logo on their tails and be painted in the Houston-based carriers colors. And it will be unveiled to customers with a new campaign, “Let’s Fly Together.”
The new United’s operations headquarters will be located in Chicago’s Willis Tower, which was formerly known as the Sears Tower. United will move forward with plans to place its crucial nerve center and 2,800 staffers in the skyscraper starting in October.
The combined airline would have revenues 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 Monday that they expect to
complete the transaction in the fourth quarter of 2010.
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 Europe routes to United’s connections in Asia will generate a surge of new international traffic and revenues.
They expect the new carrier to generate cost and revenue synergies of about $1.2 billion annually, with between $800 million and $900 million of that gain resulting from the greater scope of operations.
Executives expect to save $200 million to $300 million annually by 2013 by reducing overhead and overlapping administrative functions. The carriers said the impact on front-line workers will be minimal, with job cuts coming primarily from retirements, attrition and voluntary leaves.
However, the carrier is expected to retain a significant presence in Houston, where Continental is headquartered, sources said. City and government leaders had petitioned executives at Continental and United to consider placing headquarters for the combined carrier in the southern Texas metropolis.
Houston will become the largest hub for the new carrier, bypassing United’s longstanding fortress hub at Chicago’s O’Hare International Airport. Smisek will have offices in both cities, the airlines said.
As anticipated, Continental shareholders will receive 1.05 shares of United’s stock in the all-stock deal, which will be structured as a merger of equals. As a result, United will control 55 percent of the company to Continental’s 45 percent.
The new airline will be governed by a 16-person board, which will include two union representatives and six independent directors, a source said.
Unions representing pilots, ramp workers and flight attendants cautioned Monday morning that the merger’s success will also depend on how quickly the new carrier can form new collective bargaining agreements with its workers.
Another blow to competition, higher fares and even worse customer service. Dear Obama Admin please do not let this merger go through!!!!
Maybe they won’t have to charge for carry on baggage now?
sure the will
“The new United will also move forward with plans to place its crucial nerve center and 2,800 staffers in Chicago’s Willis Tower, where the carrier will become the largest tenant when employees start to move into the skyscraper in October, sources said.” Do I hear a new name for the Sears Tower coming up? Maybe the “Sears Continental UAL Building”.
Another Too Big To Fail outfit for us to bail out?
A good move in a failing industry. No one likes change. It’s better than going out of business and laying off a combined 70,000. Stop whining.
How about too big to succeed?
Analysis shows that larger isn’t better, after a certain point, as far as customer service, costs of operations and employment.
American Airlines gobbled up TWA and scaled back their operations to virtually nothing, leaving higher fares out of St. Louis and less choice. Oh, yes. Less jobs.
Obama’s anti-trust concerns are only about the Tea Party. He sees lots of problems with the baggage there.
After Tilton’s pension and employee cuts to United workers (while he got $33 million), perhaps Continental’s “Working Together” philosophy can overcome the “Chicago Way” philosophy of corruption and actually make the “new” United (Conited?) a better airline.
But bigger does not make better. In the coming years, when and if they can’t compete in the foreign market with other international airlines, layoffs an cutbacks will be the only option. If the open sky’s agreements ever change to allow foreign ownership of airlines, then this new United may merge with (British Airways?) and create the worlds largest airlines with headquarters in Britian? Could happen. Goodbye Chicago.
Or perhaps they will be just be too big to fail and the government will swoop in and nationalize the airlines……
Union members on the board? You might as well cut your throats!
Concentrating the operational and financial functions of what will be the the world’s largest airline…and a known terrorist target…into the tallest building in the US… and a known terrorist target…is a remarkably short sighted decision.
Doing so will put the entire business under a persistent threat of sudden -and likely fatal- decapitation.
We can look forward to fewer scheduled flights and higher fares. Not good for the public.
Hello bonuses to execs. bye bye jobs. Only in America. Sad
maybe they will do the right thing and have free checked bags, 1 free carry on (briefcase/purse size for under seat) and then have option to pay to bring the 21″ roller on. This would make boarding and de-boarding a LOT faster.
Of course they would need to actually enforce it at checkin, not the gate.
In America we build them up, then tear them down. This is an all too familiar pattern in this culture. Somehow the idea that bigger is better is something that is stuck in the psyche of corporations. Wasn’t it not too long ago that United was bankrupt and the employees bought it in order to keep their jobs? Mark my word it won’t be long before this mega airline will run into trouble and have to be broken up to survive. Remember how Wachovia gobbled up a whole bunch of smaller banks then wound up on the brink of bankruptcy? Same ol, same ol. We build them up then tear them down.
The new name should be – CONTENTED AIRLINES
I am often an outspoken critic of corporate mergers, for it is a fact that 67 percent of all mergers fail to return more than the average for their industry. However, the airline industry needs consolidation, and it needs to make more money to return to the service levels that customers want. There will always be low-price alternatives. Moreover, this particular merger makes compellingly good sense. I salute United and Continental.
The continental logo is ugly and the new font dated. United’s font is much cleaner and modern, they shouldn’t mess with it.
What a waste on money. They have just changed United Airlines logos at O’Hare T5 for new ones, and soon they will change it to one with Continental graphic?
A sad day for those of us in Houston who whose loved ones are in the corporate office here. Continental has stood for newer planes, great customer service and a hometown winning team. Now we get to merge with surly employees, bad service and one of the worst airlines. Flying won’t be as nice anymore.
Everyone bashes United, or bashes Continental bad service here, lost luggage here. One experience does not represent an entire company. Let’s give the new company time to merge operations and see where the chips land. I’ve flown both and have had good AND bad experiences AND still talk to my family members that work the ground crew here in Chicago for United and flight crew out of Newark for Continental.
EXACTLY – It’s like Yugo and Porsche merging. I have never had a good experience with United and it’s dirty planes and surly employees. On the other hand, every single last flight on CO during the past 11 years has been a delight. I go out of my way to fly Continental, now I’ll be going out of my way to find a new carrier…
I don’t know of one perfect airline. I got on a Continental flight once and the row of seats I was in wasn’t bolted correctly to the floor. They ended up putting an X of tape across all three seats and had to reseat all of us affected.
I fly United mostly and have never had many problems with them, but I don’t fly out of one of their hubs.
I think they ought to redesign the logo all together, to incorporate the best of United and Continental. I am almost a million miler on United, so I will ride this out, and hope for the best.
United used to tout themselves as the largest airline in the free world. They may have been the largest but were certainly far from the best. Not much has changed nor will it. Too big to fail or too big to suceed?
As a retired United Airlines Employee Who when I fly , I fly standby ..I get on after everyone else .. But as a standby it’s hard to understand all the complainers of how bad United Airlines is as there are an awful lot of people lined up to fill the airplane ..Ron
What’s so bad about union representation on the board. As a member of one of UAL’s unions it’s good to see labor have a voice. Or is it better if we have no say in the direction of the company we do the heavy lifting for? Sad to see such anti-labor views.
Once the kinks get ironed out in a few years, the world’s largest airline will be able to take you -anywhere- you want, sometimes in just 1 flight. Amazing. We’re so fortunate, here in Chicago, to have the transportation hub at our feet for over 7 decades &, it’ll be that way when we’re long-gone.
Each airline has its flaws & strengths, no doubt.
With strategically placed hubs situated around the world (Tokyo, Honolulu, Guam, Newark, Cleveland, Chicago, San Fran, LA, Houston, Denver & Washington DC), it really doesn’t get better than this.
Hopefully you won’t have the terrible, 31 inch seat pitch in Economy any longer from CO & that they incorporate Economy Plus, system-wide.
Both will learn from each other-from UA’s super-clean planes & awesome, on-time performance, to…CO’s fanastic culture & customer service.
This seriously could be 1, great airline.
Sorry for Houston but cheers for Chicago–makes up for losing Fields and our headquartered banks!
Both airlines have treated me well.
Many times bigger isn’t better,…its just bigger. I’ll stick with Southwest
CO, for a long time, ranked high in Fortune 500’s Best Places to Work. What’s the over / under in how many months it takes the combined airline to drop out of those rankings? Wonder how the hard working CO HDQ employees feel now? Hear the clock counting down?
Get real already. Two out of 16 does not make for much if any real influence. Tilton will be the chairman and his lackeys will still dominate… As for having one’s throat slashed, I guess you prefer dealing with Wall Street banksters who are first class bloodsuckers without compare (on a per capita basis at least!).