United CEO Glenn Tilton and Continental CEO Jeff Smisek – the latter will run the new “world’s largest airline” which will go by the name “United” – told analysts and media this morning that this is “a merger of equals” and went on the paint a rosy scenario that will conclude with an okay from Dept. of Justice.
As for equality, the execs said, United is strong where Continental is weak, and Continental is strong where United is weak.
As for airfare prices, both men called the merger “profoundly pro-competitive” and said airfare increases were not built into their estimates of the benefits of synergies; Smisek added, “When I lie awake at night worrying about the competition, I don’t worry about United” because of the lack of route overlap.
The execs however also noted that the new United will be responsive to market demand as always, and will price their product “appropriately”. Smisek noted, “This is a brutally competitive industry” but told his audience that airlines don’t set airfares – the market place does.
Smisek admitted the merger will create some pain: although Houston (Continental’s headquarters) will be “the largest hub of the world’s largest airline” and there won’t be widespread layoffs, some people will lose their jobs in both Houston and Chicago (United’s headquarters) as they eliminate duplicative functions but they said they will try to manage the process at least partly through attrition and voluntary severance.
There was some banter with reporters about an earlier United suitor; yes, said UA’s Tilton, talks with US Airways were “very serious”, though at one point Continental’s Smisek joked that his carrier ultimately had an edge because, “I’m prettier.” A reporter later suggested, when a movie version of the merger is made, Smisek’s role could be played by Jennifer Aniston.
UPDATE: Sorry, webcast should be on site soon – investors, media gets first listen.
Yes, the merger is official.
And be sure to catch all the details on this morning’s webcast which starts at 8:30am EDT - see United CEO Glen Tilton and Continental CEO Jeff Smisek talk about their new agreement. Again, as of this moment, the webcast* begins in less than a half-an-hour.
And throughout the day, I’ll be on a variety of news programs, offering my views on the merger.
*The webcast can be viewed at this link: http://www.unitedcontinentalmerger.com/ and it can also be accessed via either airline’s website.
According to numerous news reports including Bloomberg, the merger of United and Continental Airlines will be officially announced Monday, May 3 (I told you late last Thursday it was a 99% “done deal”).
*That is, barring any last minute snags – it’s been known to happen.
But for now, the reporting is that both United’s and Continental’s boards of directors okayed the merger today – unanimously – and it’s full steam ahead.
For more on the merger, I’ve put together a “white paper” on what it’ll mean, called “United andContinental to Merge — Will We Care in Twenty Years?” I think you’ll find it interesting.
I put on my “analyst hat” today, to ruminate over what a United-Continental merger could mean.
Toward that end, I also went over tons of our current and historical airfare data, and came up with some interesting insights. For instance, the lack of “overlap” in the route systems of these carriers.
If you’d like to know more, please take a look at this “white paper” of mine, called “United andContinental to Merge — Will We Care in Twenty Years?”
And we’ll talk more about this Monday – one way or the other.
According to my sources, the merger that would create a new “world’s largest airline” – starring United and Continental – is now a 99% certainty.
Also, the Wall St. Journal is reporting that the boards of directors of the two carriers will meet tomorrow and over the weekend, and an announcement could come Monday.
Of course, it could all fall apart by then – mergers are tricky situations – but at the moment, it appears to be close to a done deal.
Funny to think that, just last year, there were six legacy carriers: American, Continental, Delta, Northwest, United and US Airways. And then there were four…
Or so it would appear, anyway - at least at the moment.
From the New York Times: US Airways has ended its merger talks with United Airlines; in the meantime, United’s conversations with Continental continue.
Apparently, US Airways decided to withdraw once Continental entered the picture.
The Times quotes one analyst as saying that playing the Continental card was probably a calculated move on UA’s part: “It is highly likely that United engaged in talks with US Airways in order to prompt Continental” to negotiate, said Jeff Straebler, a strategist at RBS Securities. Now, “United will do all they can to close a deal.”
This is an update to last night’s post that revealed Delta Air Lines filed a $20 roundtrip fuel surcharge on tens of thousands of mostly smaller city-pairs.
However, Delta has now backed away from that; the carrier removed its surcharge filing – but not before both American and United matched this $20 surcharge.
By this morning though, United pulled out, leaving only American with the new surcharge.
What’s going on? You could say these new fuel surcharges are just another way of saying “airfare hike”. Face it, fuel prices – now at a little more than $80 per barrel – have not risen above airline estimates. So, the surcharge is yet another gambit to try to bring in extra revenue, much like those “peak travel” day surcharges are (and the successful bag fees).
The airlines haven’t had much luck with regular price hikes this year, so they’re trying whatever they can, to see what works – but so far, this latest attempt seems to be fizzling.
However, I do expect to see more price hike attempts, in a variety of guises, as the busy summer season approaches.
You know that United Airlines has been having talks with US Airways and Continental, and most have figured UA wants to merge with one or the other.
But what if all three got together to create a Colossus of Airlines – a gargantuan three-way type deal that would create a world’s super power of the air?
USA Today reports that, some think it could happen – that United might be trying to put together a “complex three-way deal”. Says one analyst quoted in the story, “United’s ‘Plan A’ all along has been to do a merger with US Airways and keep Continental as their alliance partner with antitrust immunity.”
Could it happen? The government could say no. As the newspaper put it, the carriers “would have to convince antitrust regulators and Congress that such a large and unprecedented combination of carriers wouldn’t reduce flight options and lead to higher fares.” That wouldn’t be easy because mergers often do lead to higher prices for passengers.
And labor would scream over the potential loss of jobs.
Could be very interesting to watch how this all plays out, though. We shall see.