United and Continental Form Worlds Largest Airline
UAL Corp (NASDAQ:UAUA) and Continental Airlines Inc. closed their merger on Friday to form the world’s largest carrier, called United Airlines.
The airline is a unit of United Continental Holdings Inc., the holding company formed under the $3.17 billion all-stock merger, and begins trading on the New York Stock Exchange on Friday under the symbol “UAL.”
UAL Corp, the acquiring company, said the new 16-member board of directors includes UAL Chief Executive Glenn Tilton, as non-executive chairman, and Continental CEO Jeff Smisek, as president and chief executive.
The new United, based in Chicago, hopes its sprawling domestic and international route network will win lucrative corporate travel contracts.
“Business travel has always been important for Continental and United, and combined it will be very very important,” Smisek said in an interview with CNBC.
The new company said it had $9 billion of unrestricted cash at closing. Company executives have said the merger will deliver $1 billion to $1.2 billion of annual cost and revenue benefits by 2013.
United will continue to operate as two separate carriers until it receives a single operating certificate, expected within 18 months.
To achieve the promised cost and revenue benefits, the new carrier must combine the 87,000 employees that make up the work forces of UAL and Continental. Each of the pre-merger carriers was heavily unionized and negotiations are under way to integrate.
UAL and Continental held merger talks in 2008 and came close to merging before Continental walked away because of concerns about UAL’s finances. The two carriers later formed a partnership within the global Star Alliance.
United and Continental had domestic hubs in Los Angeles, San Francisco, Denver, Chicago, Washington, D.C., Houston, Cleveland and Newark, New Jersey.
The airline industry has been battered in the last decade by global terror concerns, economic weakness and volatile fuel prices. Many experts say consolidation and capacity cuts are the remedy. U.S. airlines slashed capacity starting in 2008.
Delta Air Lines (NYSE:DAL), the world’s largest carrier before being displaced by United, had been No. 1 since 2008, when it bought Northwest Airlines.
