US Airways, United 'Deep' In Merger Talks - Report

Titlu : US Airways, United 'Deep' In Merger Talks - Report
Sursa : http://news.airwise.com/story/view/1270681350.html
Autor : Reuters
Data : 07/04/2010

Citat :

US Airways and United Airlines are deep in merger discussions, the New York Times reported on Wednesday.

Such a deal would create one of the world's largest airlines.

US Airways shares were up about 26 percent at USD$8.61 after the closing bell. United's stock was up 8.2 percent at USD$20.51. Shares of other airlines also rose.

Any such deal is not expected to be announced for several weeks and talks could still fall apart, the newspaper reported, citing people briefed on the matter.

An alert posted on the newspaper's website said US Airways would be the acquirer, although an accompanying story made no such reference.

At a travel industry show in February, executives of US Airways and United said their companies were open to a merger.

"UAL has been supportive of consolidation for a long time," UAL Chief Financial Officer Kathryn Mikells said at the summit.

US Airways Chief Financial Officer Derek Kerr said in a separate interview that his airline was open to merging with another US carrier.

"Consolidation is one of the major ways this industry can become profitable," Kerr said.

The two carriers had come close to merging with each other in 2008, sources said at the time.

Titlu : US Airways Negotiating Merger with United Airlines
Sursa : http://nycaviation.com/2010/04/07/us-airways-negotiating-merger-with-united-airlines/
Autor : Matt Molnar
Data : 07/04/2010

Citat :

US Airways could be weeks away from announcing the purchase of United Airlines, according to a NY Times report published this afternoon.

United and US Airways are deep in their merger discussions, though a transaction is not expected to be announced for at least several weeks, these people said, cautioning that talks may still collapse. One potential hurdle could be union opposition.

The two airlines have tried—and failed—to merge twice previously. In 2000 a $4.3 billion deal was shelved due to fierce union opposition. A 2008 merger attempt was also scrapped.

Considering US has not completely ironed out the labor issues resulting from its 2005 merger with America West, it is safe to say the union end of this deal will not go smoothly.

Titlu : United/US Airways Merger Faces Headwinds
Sursa : http://news.airwise.com/story/view/1270766588.html
Autor : Reuters
Data : 08/04/2010

Citat :

Efforts to merge United Airlines and US Airways could run into strong headwinds from unhappy pilots and tougher antitrust enforcement.

The possibility of a deal to create the world's second biggest airline sent airline shares higher, although neither US Airways nor United would confirm discussions that sources said were advancing.

Sources with knowledge of the situation said the negotiations began more than a month ago, although much of the groundwork was laid in 2008 when the two held similar talks.

The sources said the parties are currently focused on general themes, and issues such as deal structure and management will be discussed in coming weeks.

The parties were said to be mindful of hurdles to a successful merger, including competition concerns and serious labour questions at both carriers involving pilots.

"Everybody is aware of the problems," said one source.

United's pilots said they were vehemently opposed to a merger, while US Airways' pilots said they were open to a merger and wanted to be part of the discussions.

Goldman Sachs and JPMorgan Chase are advising United, several people familiar with the matter said. Citigroup is advising US Airways, the sources said.

All three banks declined to comment.

Aviation experts generally agree that consolidation would help the airline industry, and a merger with US Airways would help United. But some said a deal with Continental Airlines would be better for United.

United and Continental held merger talks in 2008 and later opted for an alliance, which has been successful.

Airlines are recovering from a painful downturn that forced massive downsizing in the last two years. A merger could accelerate fleet reductions, helping improve balance sheets.

Philip Baggaley of rating agency Standard && Poor's said a merger with US Airways would improve United's route network but could lead to higher labour costs. The combined company would probably emerge with heavy debt, he said.

UAL shares closed up 6.8 percent at USD$20.23 on Nasdaq. US Airways shares gained 10.7 percent to finish at USD$7.55 on the New York Stock Exchange.

CHANGING LANDSCAPE

"Clearly these potential talks are a massive positive for US Airways and United, but I think it speaks volumes to the changing landscape in the airline industry," said Morningstar Equity analyst Basili Alukos.

He said a potential major airline merger, combined with the capacity cuts of 2008 and 2009 hint that the industry "could be en route to earning its cost of capital."

"History is not on the side of the airlines, but maybe the horrible losses encountered recently have scared newcomers enough to reconsider starting an airline," Alukos said.

US Airways and UAL have courted for a decade -- interrupted only by their turns in bankruptcy between 2002 and 2005. A proposed merger, when both carriers were much bigger, crumbled in 2001 over fears the deal would crimp competition.

Talks revived in 2008 but fizzled amid recession.

The chief executives at both companies, Doug Parker at US Airways and Glenn Tilton at United, were, and continue to be, vocal proponents of further consolidation in an industry that has long suffered from competitive pressures and overcapacity.

The last merger of two major US airlines was between Delta Air Lines and Northwest Airlines, which concluded in 2008 and analysts consider successful.

LABOUR ISSUES

Alukos and other experts said the biggest challenge would be integrating unionised employees.

US Airways, formed in 2005 from a merger with America West Airlines, still has two pilot unions.

Airline labour groups - especially pilots - are notoriously hard to merge because pay and work rules are closely tied to seniority. A pilot could easily lose seniority in a merger and end up flying less desirable routes and planes.

James Ray, spokesman for the US Airline Pilots Association (USAPA), which represents pilots at US Airways said the union is open to a merger, but wants to be part of the discussions.

"Our union president has talked to (US Airways CEO) Doug Parker and said we are open-minded and look forward to being an active partner with US airways should they pursue a merger with anyone," Ray said.

The Air Line Pilots Association (ALPA), which represents pilots at United, said it was vehemently opposed to a merger with US Airways, that would not benefit either the airline nor its pilots.

""United CEO Glenn Tilton is well aware of our position regarding mergers and US Airways," said a statement by union official Captain Wendy Morse.

Bill Swelbar, an airline researcher at MIT, said union troubles could be a fatal impediment.

"It is my opinion that the labour issues will significantly undermine the synergies. I'm just not convinced there is an attraction. There is nothing about this that has me going 'this just seems like a great deal'," Swelbar said.

Delta and Northwest worked out their labour issues before announcing their deal.

ANTITRUST

Prospects of a US Airways-United marriage have for years raised questions about market concentration in the eastern portion of the United States, particularly at airports in the Washington DC area.

Any proposal would have to satisfy Justice Department antitrust officials under the Obama administration. They have already recommended steep concessions from carriers seeking waivers from antitrust law to strengthen their alliances.

The Delta-Northwest merger was approved by the Bush administration, which was considered more business friendly.

"Now you've got a more aggressive enforcement regime. It seems to me the antitrust hurdles are no lower than they were in 2001 and maybe higher," said John Briggs, an antitrust expert with Axinn Veltrop Harkrider.

US Airways is trying to beef up its already strong presence at Washington Reagan airport and held 11 percent of the regional Washington market overall in 2009. United is big at Dulles airport in Virginia and commanded 22 percent of Washington air travel last year, according to Transportation Department data.

US Airways biggest hub is Charlotte, North Carolina, followed by Phoenix and Philadelphia. United spreads out the rest of its operations at Chicago, Denver, San Francisco and Los Angeles.

"There are still some significant overlaps between United and US Airways, and I think the government would take a close look at that. I'm not necessarily saying to block it, but to decide what may need to be taken away in certain markets," said Edward Faberman, an aviation attorney with Wiley Rein.

Titlu : UAL, US Airways Merger Would Be All-Stock Deal
Sursa : http://news.airwise.com/story/view/1270851735.html
Autor : Reuters
Data : 09/04/2010

Citat :

The merger talks between United Airlines and US Airways revolve around doing an all-stock deal, with United paying US Airways shareholders a premium similar to that of the Delta-Northwest merger, people familiar with the matter said.

Delta, which bought Northwest in 2008, paid Northwest shareholders a 17 percent premium to the closing price on the day before the announcement.

The two sides have been negotiating break-up fees and reverse break-up fees in the 2 to 6 percent range, to be implemented if either side walks away from the deal.

The companies see more than USD$1 billion in synergies from a potential deal, the sources said. Issues such as management will be discussed in the coming days, but United Airlines would be the continuing brand, the sources said.

A deal could be sealed in a few weeks, the sources said. But they also cautioned that talks could still fall through or that other airlines could approach either United or US Airways.

Titlu : Airline Mergers Would Dwarf Solo-Flyer Continental
Sursa : http://news.airwise.com/story/view/1271025216.html
Autor : Reuters
Data : 11/04/2010

Citat :

A merger between United Airlines and US Airways would leave Continental Airlines in a tough spot, facing what some analysts called bleak prospects of flying solo among far-larger rivals.

If United and US Airways merged, they would form the second-largest airline in the United States after Delta Air Lines and before American Airlines.

Continental would hold its place as the No. 4 airline, but would be dwarfed by the top three airlines. And at its heels would be an array of low-cost airlines, such as Southwest Airlines, aiming for wider horizons.

"Continental would find itself in a strategic quagmire," Joe Schwieterman, transportation expert at DePaul University in Chicago. "They would be playing against global giants that have enormous, all-powerful frequent flyer programmes."

Industry analysts say United's overtures could be an effort to lure Continental back to the negotiating table, just two years after the two airlines halted merger talks of their own.

Continental called off talks because of its fears over United's financial condition. Continental opted instead to join the Star Alliance, an airline network which includes United.

But Houston-based Continental has recently relaxed its stance on consolidation. Speaking at a March 9 conference, chief executive Jeff Smisek said the company would "bulk up defensively" if it was in their best interest.

"Size and scale is important in the airline industry, particularly if your competitors are getting significantly larger," said S&P analyst Jim Corridore.

"Business travellers want to have the broadest range of choice and options possible," Corridore added.

Continental declined to comment. Continental's former chief executive, Larry Kellner, was unavailable for comment.

TAKING CUES FROM DELTA

Many airline analysts lauded the possible merger between United and US Airways, saying it would take even more capacity out of the industry and help prop up air fares.

Continental would undoubtedly benefit, like the rest of the industry, from less capacity and less competition, industry analysts said.

But the airline also would be left out of any benefits seen by US Airways and United, analysts said. Those two carriers would get a boost from more opportunities to connect different hubs, cut costs and see higher yields.

"At the same time Continental falls behind on those metrics because they're not changing," Corridore said. He added: "They probably are considering ways to keep that from happening."

WHERE SIZE MATTERS

Analysts have been quick to point out that a merger between United and Continental would be superior because the two airlines have very little overlap in routes as well as pilots who belong to the same union: the Air Line Pilots Association.

Even though United and Continental ended merger talks in 2008, their pilot groups talk two to three times a week and have continued to discuss the possibility of a merger, said Captain Jay Pierce, head of Continental's pilot union.

Pierce said the prospect of Continental staying solo, while the top three airlines expand makes him "nervous."

"We are in an industry where size matters," he said. "When you're trying to sell to the corporate customers... that you can get their executive from Houston to Frankfurt on Wednesday and to Dubai on Thursday, you've got to have a network large enough to do that -- every day."

He said the airline could expand by finding another partner -- "You've got American, just north of us" -- or entering more code-sharing agreements.

Should Continental be left out of the fray, it might have to transform to remain competitive. The airline could grow organically, become a niche airline serving certain markets or even transform into a low-cost airline, some analysts said.

CRT Capital Group analyst Michael Derchin noted that it was smaller airlines such as Southwest, not big network carriers, that posted profits last year.

"Right now they're evaluating the probability of a US Airways-United thing happening," Derchin said. "I'm sure there's a lot of burning the midnight oil over in Houston these days."

Titlu : United, Continental In Merger Talks
Sursa : http://news.airwise.com/story/view/1271372518.html
Autor : Reuters
Data : 15/04/2010

Citat :

Continental Airlines has restarted merger talks with United Airlines, two years after walking away from almost sealing a deal, a source briefed on the matter said on Thursday.

The talks are in very early stages, though much of the groundwork was laid in 2008, the source said. United and Continental came very close to merging at the time, but the talks fell apart as Continental chose to pursue an alliance instead.

The talks come as United is in similar discussions with US Airways, but those talks are much farther along, the source said. US Airways and United are in talks that could create the second-largest US carrier. Those discussions, aimed at cutting costs and competing with the now combined Delta Air Lines and Northwest Airlines, have been going on for months, the sources said.

UAL, Continental and US Airways declined comment.

Shares of UAL rose 3.4 percent while Continental rose 1.8 percent following the news. US Airways shares dipped 0.7 percent.

Since the news of the United-US Airways talks broke last week, shares of UAL have surged more than 22 percent, despite reports that it would be the acquirer in a deal with US Airways.

US Airways shares have risen 9 percent since then, and Continental has climbed 15 percent, reflecting investor expectations of a resumption in United-Continental talks.

"I think it's the path of least resistance from a labour perspective, from a regulatory review perspective and from a political perspective," Stifel Nicolaus analyst Hunter Keay said.

CONSOLIDATION NEEDED

Many airline executives have called for consolidation, saying it is a necessity to allow the industry to return to profitability.

Airlines, struggling with high fuel prices and a pullback in consumer spending amid a weak economy, have lost USD$50 billion in the past 10 years, according to the International Air Transport Association.

The industry lost USD$11 billion in 2009 alone.

Still, Continental has long said it would prefer to remain independent. But at a conference in March, chief executive Jeff Smisek said the company would "bulk up defensively" if it would be in its best interest.

A Continental-United merger might be easier to get through the unions, which can be a major force in getting a deal approved.

Captain John Prater, president of the Air Line Pilots Association (ALPA) union, said in February that a United-Continental merger would make more sense than other possible combinations.

A spokesman from ALPA at United was not available for comment on Thursday.

A spokeswoman for Continental's pilots union said the group had "no reaction" after news broke on Thursday. But UAL's pilots union said last week the pilots would not benefit from a merger with US Airways, adding it would "vehemently oppose" a merger that would not lead to a strong and viable carrier.

Even after United and Continental halted merger talks in 2008, their pilot groups have continued to talk up two to three times a week and discuss the possibility of a merger, Captain Jay Pierce, head of Continental's pilot union, said last week.

They have discussed a collective bargaining agreement and talked about a process to merge seniority lists, Pierce said.

Titlu : United Central To Potential Airline Mergers
Sursa : http://news.airwise.com/story/view/1271373125.html
Autor : Reuters
Data : 15/04/2010

Citat :

United Airlines is now in separate merger talks with Continental Airlines and US Airways for the second time in two years as carriers feel pressure to further cut capacity, build revenue and accelerate the industry's recovery.

Word of potential consolidation, confirmed by a source familiar with the matter, has pushed the shares of US airlines higher.

Many Wall Street analysts have responded positively to the prospect of a deal, especially between United and Continental.

"Consolidation prospects would be a significant positive for the industry and, in our view, serve to enhance what is already a compelling stand-alone case for the equities," said Barclays Capital analyst Gary Chase.

Here is how the industry may shape up should one or two mergers materialise.

UNITED/CONTINENTAL

Analysts and other industry experts agree a Continental/United pairing makes the most strategic sense and would have the best chance of clearing union and antitrust hurdles.

The two have a common pilot unions and less route overlap than United/US Airways. They are also partners in the Star alliance, which has been lucrative.

A Continental/United merger would create an airline larger than Delta Air Lines, which bought Northwest Airlines in 2008 to become the world's biggest carrier.

Such a combination would have a combined annual revenue of USD$28.9 billion, based on 2009 figures. Delta last year generated USD$28.1 billion.

"I think it's the path of least resistance from a labour perspective, from a regulatory review perspective and from a political perspective, frankly too," said Stifel Nicolaus analyst Hunter Keay, who said Continental could bid for United in a note to clients this week.

"Continental had far too much to lose by not pursuing a United merger."

Continental has big hubs in Houston, Newark, New Jersey, and Cleveland, and smaller service in Los Angeles. United is strong in Washington, Chicago, Denver, Los Angeles and San Francisco.

Continental walked away from merger discussions in 2008 due to concerns about United's finances. Analysts say United has since bolstered its balance sheet and is in much better shape.

Continental pulled in USD$12.6 billion in revenue last year, American Airlines drew in nearly USD$20 billion.

Should United and Continental merge, US Airways could consider teaming with American, whose network could "suddenly become somewhat marginalised," Keay said in a note this week.

UNITED/US AIRWAYS

A merger between United and US Airways would create the No. 3 airline in the world, according to Gimme Credit analyst Vicki Bryan.

Analysts have said this is a less favourable scenario due to potential union problems and more route overlap than a United/Continental deal. But insiders say the airlines would still benefit from less capacity, which enables them to raise fares.

"It would cement Delta in its position," Bryan said. "It could stymie the marketing position of the remaining US airlines."

The merger would likely face more regulatory scrutiny than a United/Continental proposal because of overlap in Washington, where US Airways has a major hub. US Airways also has operations in Los Angeles and Phoenix, which could raise competition questions in a United deal, experts said.

Opposition by United pilots to a merger with US Airways and discord among pilots at US Airways over seniority following the carrier's merger with America West Airlines in 2005 are red flags cited by some industry experts.

Keay projected a merger between United and US Airways had a 15 percent chance of working out.

A tie-up with Continental and American Airlines is a distant possibility should United and US Airways merge, but the two carriers have significant overlap in many markets that might be "potentially dilutive," Bryan said.

NO DEAL

Absent a merger, individual US airlines are expected to move to strengthen their balance sheets.

North American loss estimates have been pared to USD$2 billion, with passenger demand up and revenues growing in an improving economy, according to the International Air Transport Association.

One worry, however, is fuel prices, which have been on the rise and are expected to average USD$81 this year, compared with USD$62 in 2009.

Analyst Helane Becker, from Jesup & Lamont, believes the major carriers would continue to grow internationally and through their alliances if left on their own.

"The big international airlines are going to do better than the smaller domestic airlines. Airlines like Continental, Delta, United and American -- those guys will do fine," Becker said.

Consultant Mike Boyd said major carriers do not have to merge to thrive.

"Does it make the entity more efficient, a saviour to the system? No," Boyd said of consolidation.

He said Continental and American are both strong as stand-alone carriers, especially American with its robust South American business and its plans to build up its transatlantic service.

United has a good route network, but would have to shift its primary focus away from becoming smaller to growing in a smart way so it could be an attractive merger partner, Boyd said.

"They can survive," he added.

US Airways, however, could struggle without an international partner, Becker said.

Boyd said US Airways "has some challenges" in integrating pilots groups from its 2005 merger with America West Airlines.

"The asset they have is probably the most visionary management in the industry," Boyd added.

Titlu: US Airways Pulls Out Of United Merger Talks
Sursa: http://news.airwise.com/story/view/1271982248.html
Autor: Reuters
Data: 23/04/2010

Citat :

US Airways said on Thursday it has dropped out of merger discussions with United Airlines parent UAL, a decision that changes the dynamic of similar talks between UAL and Continental Airlines.

US Airways' withdrawal puts Continental at centre stage of a potential merger scenario that experts say would stabilise the embattled airline industry. But it also steals some negotiating leverage from UAL, which was courting two airlines at once.

Neither UAL nor Continental has confirmed that they are in talks. Sources close to the discussion say they are, and many experts believe UAL had entered talks with US Airways only to draw Continental -- arguably a better match for UAL -- into separate discussions.

"It does create more of a sense of inevitability about United and Continental. Now we're no longer kidding ourselves that US Airways is on an equal par with Continental," said Joe Schwieterman, transportation expert at DePaul University in Chicago.

"United can no longer pit one airline against the other and take the best deal," Schwieterman said. "So it's taken strategic benefits off of United's plate."

A merger of UAL and Continental would form the world's largest airline, ahead of Delta Air Lines. Some experts say that integrating the two carriers would be easier than merging UAL and US Airways because they have more compatible route structures and work forces.

US Airways shares dropped 4.9 percent to USD$6.43 on the New York Stock Exchange. UAL shares were up 1.3 percent at USD$21.71 on Nasdaq. Shares of Continental, which reported a larger-than-expected quarterly loss on Thursday, were up 0.6 percent at USD$21.59 on the NYSE.

"After an extensive review and careful consideration, our board of directors has decided to discontinue those discussions," US Airways said.

"It remains our belief that consolidation makes sense in an industry as fragmented as ours," the company added.

The US Airways statement was the first acknowledgment by the company that it had been in talks with UAL, their second round of merger discussions in two years. A lone US Airways/United merger proposal foundered in 2001 on competition concerns.

Continental chief executive Jeff Smisek declined to comment on the merger.

UAL would not directly address the US Airways statement but said in a statement it believes the airline industry would benefit from consolidation.

"We thoughtfully consider opportunities, based on what's in the best interest of our company, our employees, our customers, our shareholders and the communities we serve," UAL said.

UAL also held talks with Continental in 2008. Continental walked away from those discussions and the two airlines later entered into a strategic partnership that fell short of a merger.

The disclosure by US Airways added more volatility to a sector struggling to gain altitude heading out of a two-year financial downturn triggered by high fuel costs and weak passenger demand.

Some industry experts believe that one airline merger could spur others and that several different combinations of major airlines are possible. The chief executives of UAL and US Airways -- Glenn Tilton and Doug Parker -- are the two most vocal proponents of consolidation for the airline industry, which they say suffers from overcapacity.

US Airways, itself, was formed from a merger of USAir with America West Airlines in 2005. That airline later attempted and failed in a hostile takeover bid for Delta.

The first wave of financial results for 2010 have been mixed. Carriers, in most cases this week, reported improved revenues and effective cost controls, save for stubbornly high fuel expenses.

Continental's widening loss illustrates challenges faced by airlines under pressure by some analysts and executives to consolidate to accelerate capacity reductions. Airline executives also believe the slow pace of economic recovery is a stress on future profits, even though demand is up and fares are higher.

Titlu: UAL, Continental In No-Premium Merger Talks
Sursa: http://news.airwise.com/story/view/1272020680.html
Autor: Reuters
Data: 23/04/2010

Citat :

United Airlines parent UAL and Continental Airlines are considering a stock-for-stock merger with no premium, creating a company valued at roughly USD$6.6 billion, a person familiar with the matter said on Thursday.

UAL chief executive Glenn Tilton would become chairman of the combined company, while Continental CEO Jeff Smisek would become chief executive, according to the person, who declined to be named because the talks are private.

UAL spokeswoman Jean Medina and Continental spokeswoman Mary Clark declined to comment.

Earlier Thursday, US Airways said it has dropped out of merger talks with UAL. Many experts believe UAL entered talks with US Airways only to draw Continental, arguably a better match, into separate talks.

Continental had restarted merger negotiations with UAL last week, two years after walking away from similar talks after nearly reaching an agreement. The Houston-based carrier instead chose to pursue an alliance.

Under the terms discussed in 2008, Larry Kellner and Smisek, then respectively Continental's chief executive and president, would have retained those positions in a combined company. Tilton would have gotten a seat on the merged company's board of directors.

Titlu: United, Continental Disagree On Price
Sursa: http://news.airwise.com/story/view/1272246917.html
Autor: Reuters
Data: 26/04/2010

Citat :

United Airlines and Continental Airlines disagree over the price of a potential stock-for-stock merger, according to source familiar with the situation.

Last week, sources said that the airlines were considering a stock-for-stock merger with no premium, creating a company valued at roughly USD$6.6 billion.

The companies resumed merger negotiations earlier this month, two years after walking away from similar talks.

The companies, however, have disagreed on the exact ratio of shares that United planned to pay for Continental, said the source, who declined to be named because they were not authorised to speak to the media.

The ratio affects the price United would ultimately pay for the deal.

Negotiations are ongoing, the source said. The New York Times reported that the disagreement over the price, however, could be a deal-breaker.

Continental wants to use the so-called "unaffected share prices" -- which is the price of the stock before news emerged of recent spate of airline merger talks, the source said.

United, however, wants to use a later market price, the source said.

Under Continental's scenario, Continental would receive more United shares and a higher overall deal price, the sources said. Using United's method, the exchange ratio would be lower.

The price difference could be material in the talks.

United's share price has risen to USD$22.99 from USD$18.95 on April 7 when news of talks between United and US Airways first broke. The talks with US Airways have since ended. In that same time, Continental's stock has risen to USD$22.01 from USD$20.50.

Other aspects of the potential deal have already been agreed to, including naming United chief executive Glenn Tilton as chairman and Continental's head Jeffery Smisek as CEO, sources previously said.

The combined company would be named United, the NYT reported.

Titlu: United, Continental To Announce Merger On Monday
Sursa: http://news.airwise.com/story/view/1272591495.html
Autor: Reuters
Data: 30/04/2010

Citat :

United Airlines and Continental Airlines are expected to announce that they are merging to form the world's largest airline on Monday, the Wall Street Journal reported on Thursday, citing unnamed sources.

Continental's board would meet on Friday and Sunday, and United's would meet on Friday, the newspaper said on its website.

United declined to comment and Continental did not immediately respond to a request for comment.

Meanwhile, a source close to the situation said concern over the share-price ratio to be used in a potential stock swap was "no longer an issue" and added that an announcement of the deal would likely be made early next week.

The two US airlines resumed merger negotiations earlier this month, two years after walking away from similar talks.

Other aspects of the potential deal have already been agreed to, including naming United chief executive Glenn Tilton as chairman and Continental CEO Jeff Smisek as chief executive, sources previously said. United would be the surviving brand and the combined company would be based in Chicago, they added.

The Journal report, citing people familiar with the matter, said that Tilton would be non-executive chairman for two years, after which Smisek would also take on that post.

Shares of United fell 1.3 percent to USD$21.47 on Thursday, while Continental rose 2.4 percent to USD$22.70.

Titlu: United, Continental Boards Approve Merger
Sursa: http://news.airwise.com/story/view/1272853641.html
Autor: Reuters
Data: 03/05/2010

Citat :

United Airlines parent UAL will buy Continental Airlines for USD$3.2 billion, forming the world's largest carrier in a merger that further shrinks the embattled US airline industry and could drive up air fares, sources said on Sunday.

The boards of directors of both companies unanimously approved the deal, which was expected to be announced by the carriers on Monday morning, sources familiar with the discussions said. UAL and Continental declined to comment and neither airline has confirmed the votes.

If given regulatory approval, the carrier would be called United Airlines and would be based in Chicago, with over USD$29 billion in annual revenue, a source said. The deal would generate up to USD$1.2 billion in revenue and cost benefits for the combined company.

"The combined firm would have more staying power than each of them individually," Robert Mann, airline consultant at RW Mann, said. "Part of it is the consolidation provides pricing power and the opportunity for pricing power for the entire industry."

"The margins on the combined business would be better," Mann said. "The share of revenue that's consumed by revenue will be lower. Margins will be better."

The airline industry is recovering from an economic downturn that drained travel demand and forced carriers to downsize.

Experts have said consolidation would lend much-needed stability to the industry, which has been dogged by low-fare competition, terrorism concerns, volatile fuel prices and overcapacity.

ALL-STOCK DEAL

United and Continental have agreed to an exchange ratio of 1.05 UAL shares for each Continental share in an all-stock deal, the sources said. That value would be determined by the market, and could change by the time the deal closed.

Based on United's stock price of USD$21.83 on Friday afternoon, and Continental's 139.6 million outstanding shares as of April 21, United would pay USD$3.2 billion for Continental.

Based on current shares outstanding, a combined company would have 314.5 million shares, and UAL shareholders would own roughly 53 percent of the new company.

Under the terms for the all-stock merger, UAL chief executive Glenn Tilton would become non-executive chairman of the combined carrier while Continental CEO Jeff Smisek would become chief executive.

The carriers are planning a 16-member board with six directors from each airline, plus Tilton and Smisek, and two seats from unions. The airlines hope for US regulatory approval of the proposed merger by year's end.

The new company on paper now would have a combined work force of nearly 90,000 employees and a combined fleet of 693 planes.

United Airlines took in more than USD$16 billion in operating revenue for 2009. The carrier has hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, DC. The carrier boasts a strong presence on Asia-Pacific routes, Europe and Latin America.

The carrier has 46,000 employees and a mainline fleet of 360 planes.

Continental, which saw USD$12.6 billion in annual revenue for 2009, has about 41,000 employees and hubs in Newark, New Jersey, Houston and Cleveland. Continental has a mainline fleet of 333 jets.

The unions representing pilots at UAL and Continental did not have immediate comment.

Although Captain John Prater, the president of the Air Line Pilots Association, which represents UAL and Continental pilots, said in February that a merger of the two carriers made more sense than other possible combinations because they have less route overlap.

UAL and Continental are both members of the global Star Alliance of airlines. UAL shares trade on Nasdaq. Continental shares trade on the New York Stock Exchange.

LONG TIME COMING

The leaders of both airlines have engaged in merger talks before, the most recent being in 2008, when Continental walked away at the last minute out of concern for UAL's then-fragile financial position.

Continental and UAL later agreed to link up in a strategic global alliance. The most recent round of talks were completed in about three weeks, a source familiar with discussions said.

Some industry experts believe that one airline merger could spur others and that several different combinations of major airlines are possible. The last major airline merger was in 2008 between Delta Air Lines and Northwest Airlines to form what is currently the world's largest airline.

UAL and US Airways also were in merger talks this year, but US Airways pulled out last month. US Airways CEO Doug Parker, a vocal proponent of airline consolidation, has said that any mergers are good for the industry because they pull capacity out of the bloated system.

"I think it's going to force other carriers to raise the question (of consolidation)," said Hunter Keay, airline analyst at Stifel Nicolaus. He said a merger between US Airways and American Airlines parent AMR makes sense from a "network perspective."

"It certainly raises the question," Keay said. "I don't see it happening in the short-term."

Titlu: Combined Continental and United fleet could reach 750 by 2014
Sursa: http://www.flightglobal.com/articles/2010/05/03/341428/combined-continental-and-united-fleet-could-reach-750-by.html
Autor: Lori Ranson
Data: 03/05/2010

Citat :

United and Continental Airlines are attempting to create maximum fleet flexibility in their combined merger, and are targeting a combined fleet of 550 to 750 aircraft by 2014.

The two companies unveiled their badly kept plans to merge earlier today, and Continental CEO Jeff Smisek admitted he was driven to contact his counterpart at United Glenn Tilton by United's merger discussions with US Airways.

Smisek says the projected fleet range allows the combined carrier, which will retain the United name but feature the Continental livery and colours, to "flex up or flex down" in response to market conditions.

Smisek and Tilton during a call with analysts gave little insight into the fate of United's firm order for 25 Airbus A350s. Tilton only says the "utility" of the A350 has not changed.

Significant issues surrounding the combined entity's management structure, labour and operations remain unresolved, and Tilton and Smisek are forming an integration team to examine the executive make-up of the new airline.

While there are likely to be fence agreements with labour groups in place from the time of the legal closing of the merger to the official combining of operations, Smisek says in order to have the appropriately sized company, individuals will lose jobs in Chicago and Houston.

Smisek stresses even though the combined entity will be headquartered in Chicago, Houston is pegged to become the largest hub for the new United.

It remains to be seen the specific role secondary hubs such as Cleveland will play in the combined carrier's network, which will feature 10 hubs. Smisek explains it is premature to talk about how Cleveland, or any the hubs will fit into the new network.

Responding to a question about the combined United forging a relationship with a low cost carrier similar to the tie-up between JetBlue and American Tilton simply states: "We have exactly what we need."

United and Continental are aiming to close their merger transaction by year-end, and are targeting to receive a single operating certificate from the US FAA by mid-2012.

The combined revenue and cost gains should generate net annual synergies of the combined entity of $1 to $1.2 billion. Roughly 75% of that total should be achieved in 2012, says Smisek, with the remaining 25% following in 2013. United and Continental calculated those synergies by overlaying the combined current fleets of the two carriers.

Smisek also estimates the combined entity should transport roughly 144 million passengers annually.

Neither executive has any anxiety about receiving approval from the US Department of Justice (DOJ) for the merger. In a formal presentation the carriers point out there are 81 US domestic United destinations not served by Continental and 42 of Continental's domestic cities are not currently included in United's network.

Confirming the United-US Airways talks were a driving force in Continental's decision to renew merger talks with United, Smisek jokes that Continental didn't want United "to marry the ugly girl".

Smisek formally contacted Tilton to discuss a merger on 9 April.

Titlu : United, Continental Name Merger Integration Team
Sursa : http://news.airwise.com/story/view/1274314386.html
Autor : Reuters
Data : 20.05.2010

Citat :

United Airlines and Continental Airlines, which plan to merge, said on Wednesday they have agreed on the structure and leadership of a merger integration team.

In messages to employees included in Securities and Exchange Commission filings, the two airlines said a six-member panel will make key decisions on the integration.

That panel's members will include Continental chief executive Jeff Smisek and UAL chief executive Glenn Tilton, Continental finance chief Zane Rowe and United Chief Financial Officer Kathryn Mikells, Continental Chief Marketing Officer Jim Compton and Pete McDonald, chief administrative officer at United.

The filings added that the companies expect the merger, which must be approved by regulators, to close later this year. The process by which the two carriers are integrated into a single operating entity is expected to be completed by the first half of 2012, Continental's filing said.

Smisek is expected to be chief executive of the new United Airlines, which would become the world's biggest airline ahead of Delta.