Continental, UAL shareholders approve merger

September 17, 2010 8:17:59 PM PDT
Shareholders at Continental Airlines and United voted to merge the two companies, creating the world's largest airline.

The multi-billion dollar merger could have far-reaching effects on where you fly and how much you will pay.

The new airline retains the United name. But the Continental logo will go on the tail of all its planes. Continental's boss, Jeff Smisek, will be the CEO, and United's number one, Glenn Tilton, long an advocate of airline mergers, will be the new United's chairman.

"I think it's thrilling that United Airlines is still going to be in Chicago, given its history, and the world's leading airline is going to be headquartered in Chicago," said Tilton.

The United-Continental merger announced back in May was approved by government regulators sooner than expected. With shareholder approval, the next step is a legal OK, anticipated the first of next month.

Both airlines now begin the process of integrating systems, how they handle reservations and frequent flier miles. While similar in many respects, the two airlines do have differences, including the procedure they use to board passengers on their planes. Refining all that may take a year.

Some regular flyers are skeptical about the merger and what it might mean to ticket pricing, though government regulators felt the two systems complimented each other, and would not be anticompetitive.

"My perception is it can't get any worse," said Scott Wilson, San Diego.

"When I fly Continental my status on United doesn't carry over to Continental so from that standpoint I see it being an advantage," said Tim Lepczyk. "The one thing I do question is what is it going to do relative to ticket prices."

Part of the process of melding two airlines into one involves reaching labor agreements. Pilots at United have supported the merger in principle, but they're not happy with United's increasing use of smaller regional jets and their lesser paid pilots. It's an issue called 'scope.'

"We do have components of scope that our colleagues at Continental do not have to there's clearly going to be discussion about that, but given the size of the prize here and the opportunity for sustainable employment and sustainable advancement, and working for the world's biggest airline, I'd say that'll put us in the position to have some pretty constructive conversations," said Tilton.

The combined airline will see some cuts in employees. The numbers are not yet known but they are expected on the mid and upper management levels and not so much on the front line.

How would the merger affect passengers?

It could be several months before passengers see any significant changes from this deal. The new combined airline is expected to save the two carriers more than $1 billion. But don't expect those savings to be passed on to consumers.

At O'Hare Friday night, United and Continental passengers had mixed opinions about the merger.

"If it's not too large, and they don't sacrifice customer service, that's not a problem for me," said airline passenger Cindy Robey.

"You hate to pay more, but at the same time you need an industry that's going to be able to survive and prosper hopefully," said United passenger Gordon Anderson.

The new combined airline will be called United, but the planes will have Continental's colors and logo.

Continental's boss Jeff Smisek will be CEO. United's chief Glenn Tilton will be chairman.

"We have to execute. We have to execute against the promise of the merger," Tilton said.

And there is much promise, say the two airlines. The new carrier will combine the strengths of United's Pacific routes and Continental's Latin American connections.

But some say bigger isn't necessarily better.

"It may be better for some of the shareholders. Is it better for the marketplace? I don't think so," said Northwestern business professor Aaron Gellman.

Conventional wisdom says less competition means higher fares. There is also a question of clashing cultures.

"I'm not against it as long as they kind of keep the service that I've been getting from Continental. That's the reason I fly them right now," said James Tudor, a Continental passenger.

For now, Continental and United will continue flying as separate airlines under the same management.

More significant changes, including combining websites and reservation systems, could take more than a year to resolve.

There are also labor issues to work out.

"A lot of the labor force is going to play hard ball in trying to get back some of what they perceive they gave up when times were tougher," Gellman said.

Already, the United pilots union, which supports the merger, says it's concerned with United's use of lower-paid pilots to fly regional jets. Continental's model, which favors pilot seniority, is more to the union's liking.

Continental and United say your frequent flier miles will be safe and the two programs will be merged.

The two carriers also need to reconcile their very different fleets. United uses a lot of Airbus planes; Continental relies on Boeing aircraft. The fact that Boeing and the new United will both be headquartered in Chicago could bode well for Boeing.

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