United-Continental merger to create global behemoth

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United-Continental merger to create global behemoth

Unread post by bimjim » Tue May 04, 2010

http://atwonline.com/news/united-contin ... emoth-0503

United-Continental merger to create global behemoth
By Perry Flint
May 4, 2010

The merger between Continental Airlines and United Airlines announced yesterday will, if consummated, create the world's largest airline by RPKs, serving 370 destinations in 59 countries with 692 mainline aircraft.

"Together we create the world's most comprehensive network. Our networks quite literally complete each other, with little overlap and with strategically located hubs that provide gateways to the Pacific, the Atlantic, Latin America, the Middle East, Hawaii and Micronesia," UAL Chairman, President and CEO Glenn Tilton said in a webcast yesterday announcing the deal.

"This is a merger of equals in the truest sense," CO Chairman, President and CEO Jeff Smisek added during the webcast. Under the deal, CO shareholders will receive 1.05 shares of UAL common stock for each CO share they own, with a transaction value of approximately $8 billion (ATWOnline, May 3).

United shareholders will own approximately 55% of the combined holding company, which will be named United Continental Holdings. Tilton will serve as nonexecutive chairman of the board of United Continental through Dec. 31, 2012, or the second anniversary of the deal's closing. Smisek will be CEOand will add the title of executive chairman upon Tilton's ceasing to be nonexecutive chairman.

On a pro forma basis, the combined company would have annual revenues of $28.9 billion based on 2009 financial results, versus $28.1 billion for Delta Air Lines, currently the largest US carrier. The companies expect synergies of $1 billion-$1.2 billion annually by 2013 including $800 million-$900 million of incremental annual revenues and $200 million-$300 million in net cost synergies. One-time merger costs are expected to total $1.2 billion spread over a three-year period.

In addition to an extensive domestic network with little nonstop overlap, the combined carriers will serve 31 transpacific destinations in 14 countries with 62 daily departures, 72 destinations in 24 Latin American countries with 156 daily departures and 34 transatlantic destinations in 21 countries with 74 daily departures. "Put simply, Continental is strong where United is weak and United is strong where Continental is weak," Smisek said, noting that 57% of the carriers' capacity is deployed domestically, 20% across the Atlantic, 15% in the Pacific and 8% in Latin America. "We have no international route overlaps," he stated.

They operate six aircraft types, with the 747-400 and the A320 family exclusive to UA and the 737 exclusive to CO. Both fly the 777, 767 and 757 and each has ordered the 787, while UA also has chosen the A350-900. Commenting on the health of that order, Tilton said, "The A350's utility isn't changed by the fact that we've become one company."

United will be the surviving airline's name, while aircraft will sport the CO livery, logo and colors. The combined company will have 10 US hubs although not all are expected to survive the merger, with speculation centering on CO's Cleveland hub, which has been downsized over the years and is mostly served by regional jets operated by ExpressJet.

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