United, Continental to merge

(AP) — United Airlines has agreed to buy Continental in a $3 billion-plus deal that would create the world's largest carrier with a commanding position in several top U.S. cities.

The new United would surpass Delta Air Lines in size, which should help it attract more high-fare business travelers. It will fly to 370 destinations in 59 countries.

The companies insisted the deal is a merger of equals.

But United shareholders will hold a majority stake, the airline will be based in United's hometown of Chicago and it will be called United.

It would be run by current Continental CEO Jeffery Smisek, however. United CEO Glenn Tilton, a longtime advocate of consolidation in the airline industry, will be non-executive chairman for up to two years before Smisek adds the chairman title.

The new parent company will be called United Continental Holdings Inc., and have about $29 billion in annual revenue based on 2009 results and $7.4 billion in unrestricted cash. The airlines said combining would save them $1 billion to $1.2 billion a year by 2013, including between $800 million and $900 million in new yearly revenue.

The deal would create a giant with major hubs in key domestic markets including New York, Los Angeles, Chicago, Houston and San Francisco and an international network stretching from Shanghai to South America.

It will leave three big U.S. airlines with major international routes — the new United, Delta and American Airlines, with US Airways a distant fourth.

United is the nation's third-largest carrier by traffic, while Continental Airlines Inc., in Houston, is No. 4.

United Airlines, Continental strike merger agreement

(Crain's) — United and Continental airlines have reached an agreement on a merger and expect to announce a deal by Monday, pending approval by their boards, a source briefed on the matter says.

United’s board is set to meet Friday to discuss the deal, the source told Crain's, and Continental’s board is expected to vote Sunday.

Under terms of the deal, Continental shareholders will receive 1.05 shares of United stock for each share of the Houston-based airline, according to a source.

That would value the all-stock transaction at about $3.3 billion. Two years ago, Delta Air Lines and Northwest airlines merged in a $3.1 billion deal.

A deal isn’t assured. Continental’s board voted down a merger with United two years ago in a Sunday afternoon vote.

But that seems less likely now. Then, the industry was headed into a recession, and United’s financials were deteriorating. Now, air travel is beginning to recover, and United is leading the way, enjoying the biggest gains in revenue among the traditional carriers.

Continental and United also feel pressure to keep pace with Delta Air Lines and Northwest Airlines, which merged two years ago to create the nation’s biggest airline.

The all-stock deal would create the nation’s biggest airline and give United CEO Glenn Tilton the merger he’s sought since taking the helm of United’s Chicago-based parent, UAL Corp., in 2002.

Chicago is expected to end up a big winner in the deal: The new airline would retain the United brand and have its headquarters here. Continental CEO Jeff Smisek would be CEO, and United CEO Glenn Tilton would be chairman.

The two airlines have been talking about a deal since mid-February after Mr. Tilton told the Financial Times that he was interested in renewing merger talks with Continental and started talking up the virtues of mergers and consolidation in speeches and interviews. The two airlines formed an alliance after previous merger talks ended.