Reports: Boards approve United-Continental merger

FILE: A United Airlines plane leaves San Francisco International Airport July 31, 2006. ((AP Photo/Paul Sakuma, file))

May 2, 2010 8:28:37 PM PDT
Reports surfaced Sunday that directors at both United and Continental airlines voted to merge. If the agreement is approved by federal regulators, it would create the world's largest airline.An announcement was expected Monday.

The new company would be run by Continental CEO Jeffery Smisek. United CEO Glen Tilton would be chairman.

The merger would leave the United States with the big international airlines, the new United, Delta and American and is expected to be worth more than $3 billion. It still needs the approval of the anti-trust regulators.

"I think that is the big hurdle. They need to be concerned the justice department is going to need to have some differences between this and the Delta/Northwest merger, which they approved," said Prof. Aaron Gellman, Transportation Center Northwestern University.

Gellman says that although airlines are coming off very bad performance years, he does not believe mergers are the best solution or in the public's best interest.

"I think it is well-proven, when you consolidate an industry, you end up with higher prices and a lower propensity to innovate because you have a bigger share of the market," Gellman said.

The combined airline will be called United and will be based in United's hometown of Chicago.

"That is good for Chicago, ultimately. I suspect rates will be higher in a market where they do not face competition," said Gellman. "I am not sure there will be more jobs. I suspect, in the end, there will be less."

If approved, the deal would give Tilton the merger he has wanted since becoming United's CEO in 2002.

One key issue in the merger is bringing together their pilot workforces. A union hotline message to United pilots Sunday said union officials "are fully prepared to protect and defend the interest of all United pilots."

A news conference is expected Monday to announce details of the deal.


Load Comments