Money Matters, Simplified.
United, Continental agree to merge
by Jaspreet Virk - May 3, 2010 - comments
Both the airlines fly to 370 destinations in 59 countries, and will continue to serve all the destinations even after the merger. The deal is expected to be completed by the end of this year.
In what can be termed as a deal to give rise to the world's largest airline in terms of traffic, United Airlines and Continental Airlines Inc. have reached negotiations and agreed to a merger worth $3 billion, according to sources familiar with the matter.
The negotiation was reached Sunday, and the deal is expected to be officially announced Monday.
The deal, when inked, will give birth to an airline behemoth that will dominate not only domestic markets such as New York, Chicago, and Los Angeles, but also international markets like Asia, Latin America, and Europe.
The two carriers have reached a deal after the talks had collapsed two years ago. Both United and Continental reignited merger talks last month.
The terms of the deal
The world’s largest carrier will be named United and will be based in Chicago.
The combined entity will be run by Continental’s Chief Executive Jeffery A. Smisek. United’s Glenn Tilton will be chairman of the merged company.
Further, it is expected that United’s parent company, UAL Corporation, will give 1.05 shares for each share of Continental, thus leading to an acquisition worth $3.17 billion.
While James Burnley, a partner at Venable LLP in Washington, told BusinessWeek that the Justice Department could be “skeptical” about the deal, Paul Mifsud, a Washington consultant, said that he does not see “antitrust issues as very serious.”
Both the airlines fly to 370 destinations in 59 countries, and will continue serving all the destinations even after the merger. The deal is expected to be completed by the end of this year.
U.S. approval mandatory
Though the boards of both the airlines have agreed to the transactions, the carriers still need the anti-trust approval for the deal to materialize.
The Department of Justice will review the deal to ascertain if the deal hinders competition on routes to China and Japan and from New York to Europe.
In order to ensure that the proposed merger does not hinder competition, the Justice Department may ask the airlines to cede some flights and give away spots at certain airports, including Liberty in Newark, New Jersey.
While James Burnley, a partner at Venable LLP in Washington, told BusinessWeek that the Justice Department could be “skeptical” about the deal, Paul Mifsud, a Washington consultant, said that he does not see “antitrust issues as very serious.”