United and Continental merge

By Howard Dicus - bio | email

HONOLULU (HawaiiNewsNow) - The airline that flies more seats to Hawaii than any other is now even bigger, as officers of United Airlines and Continental Airlines signed merger papers Friday.

United already had the largest market share of service to Hawaii from everywhere else, flying to the islands from Chicago, Denver, San Francisco, Los Angeles, Tokyo and Osaka. Continental flies to Hawaii from Guam, Los Angeles, Houston and Newark.

The new company, called United Continental Holdings, the result of a $3.47 billion dollar all-cash deal with UAL shareholders taking 55% of the new stock, immediately began trading on the New York Stock Exchange under the ticker symbol UAL and the price immediately rose roughly 5% to trade around $24.75 a share.

So far the merger is purely corporate. Passengers were told to report their usual ticket counters and their usual gates, to take flights with the same numbers as the day before, on jets that have not been repainted, to earn miles on their existing frequent flier programs. It takes months, and sometimes years, to consolidate operations at airports served by both carriers.

The biggest challenge is negotiating new unified labor contracts and merging seniority lists, since airline flight personnel traditional bid for routes based on seniority.

"We look forward a collaborative relationship with all of United's new management," said Greg Davidowitch, president of the United division of the Association of Flight Attendants.

The heads of the United and Continental chapters of the Air Line Pilots Association took a more reserved view.

"The pilots of the combined airline are not yet ready to celebrate," said Wendy Morse and Jay Pierce.

Airline analysts were skeptical of corporate expectations of more than $1 billion in annual cost savings or new income within three years, noting that Delta and Northwest projected the same thing.

"We pored over Delta's results and frankly can't identify the synergies Delta claims," said Jamie Baker of JP Morgan.

Airlines are truly merged only when the Federal Aviation Administration grants a single operating certificate. Delta Air Lines acquired Northwest Airlines in October 2008 but didn't get its unified operating certificate until this year. US Airways and America West merged five years ago and still don't have one.

"The specter of a US Airways standoff circles overhead like an albatross," airline analyst Robert Mann told the Chicago Tribune.

When Delta acquired Northwest, it had a key advantage: Delta CEO Richard Anderson came to the company after holding the same post at Northwest. In the United-Continental merger, the executive team is a mix of managers from the two sides. Continental CEO Jeff Smisek is the CEO of the new company as United CEO Glenn Tilton becomes non-executive chairman. The top operating officer comes from United. This is symbolized by the plan for jet designs, which will combine the United name with the Continental globe logo on the tail.

With 5,800 flights a day, the new United will be larger than Delta, but by fewer than 100 departures. American Airlines will be third-largest. United has hired Bain & Co. as a merger consultant. It's the same company Delta and Northwest used.

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