US Airways ends talks with United about combo
UAL Corp.'s United Airlines and Continental Airlines Inc. are considering a stock-for-stock merger with no market premium, said two people with knowledge of the talks, creating a company valued at more than $6 billion.
UAL Chief Executive Officer Glenn Tilton, 62, would become chairman while Continental CEO Jeff Smisek, 55, would become CEO, said the people, who asked not to be identified because the details are private. The terms aren't final and a deal may be more than a week away, the people said today.
Putting together United and Continental would create the world's largest carrier by passenger traffic, surpassing Delta Air Lines Inc. The discussions were described after US Airways Group Inc. said it had ended merger talks with United, leaving United and Continental as the focus of industry consolidation.
"United and Continental would make a great combination and give them market mass against Delta," said Ray Neidl, an independent airline analyst in New York. "Their route combination would be just about the best in the industry."
Other directors and executives at the combined airline besides Tilton and Smisek also may be drawn from the board and management at both companies, the people said.
Based on today's closing stock prices, the merged carrier would have a market value of $6.6 billion. UAL's value was about $3.64 billion and Houston-based Continental's was about $2.98 billion, ranking them third and fourth in the U.S. industry, according to data compiled by Bloomberg.
UAL jumped as much as 89 cents, or 4.1 percent, to $22.60 at 4:42 p.m. after the close of regular Nasdaq Stock Market trading. Continental slid as much as 46 cents, or 2.1 percent, to $20.97 on the New York Stock Exchange.
Jean Medina, a spokeswoman for Chicago-based United, declined to comment. A message left with Continental's Julie King wasn't returned.
"We are examining Continental's options and will take whatever action we believe to be in the best interest of our stockholders, customers, employees and the communities we serve," Smisek told analysts earlier today on a conference call.
United and Continental are the third- and fourth-largest U.S. airlines by traffic, trailing Delta and AMR Corp.'s American Airlines.
Their discussions began this month, after talks got under way between United and US Airways in February, people have said. Tempe, Arizona-based US Airways pulled out after concluding that United was more interested in pursuing a tie-up with Continental, people familiar with those talks said today.
"Over the past several months, we have studied a transaction with United," US Airways CEO Doug Parker told employees in a letter. "However, those talks have not progressed to a merger agreement, and for the foreseeable future we intend to remain a stand-alone carrier."
The United-Continental negotiations restart conversations that collapsed in 2008 when Continental decided to stay independent. Continental later joined the Star Alliance group of airlines led by United.
Together, United and Continental would leapfrog Delta for the top spot across both the Atlantic and Pacific among U.S. airlines, with 40 percent and 53 percent of traffic, based on data compiled by Bloomberg. The merged carrier would be No. 2 in Latin America behind American.
Blending their route systems would produce two hubs at U.S. East Coast business centers, United's at Washington Dulles and Continental's at Newark, New Jersey. United's routes include flights between Washington and Moscow, a city not served by Continental.