United, Continental to form world's biggest airline

10:23, May 04, 2010      

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United Airlines and Continental Airlines announced Monday that they have agreed to merge, creating the world's biggest carrier in an all-stock transaction.

But the deal, which has been unanimously approved by the boards of directors of both companies, still needs to be approved by the shareholders.

The companies said they expect to complete the merger in the fourth quarter of this year.

The new merged giant, which will keep the United name and maintain its headquarters in Chicago, will account for 7 percent of global airline capacity, ahead of US rival Delta, which currently leads with 6 percent.

Under the agreement, Continental shareholders will receive 1.05 shares of United common stock for each Continental common share they own.

United shareholders will own approximately 55 percent of the equity of the combined company, and Continental shareholders will own approximately 45 percent, including convertible securities.

The combined company would have an annual revenue of approximately $29 billion and an unrestrict-ed cash balance of approximately $7.4 billion, given figures available at the end of the first quarter of this year, officials said.

The merger is expected to deliver between $1 billion and $1.2 billion in net annual gains by 2013, including between $800 million and $900 million in incremental annual revenue, the companies projected.

In their combined effort, Continental and United will serve more than 144 million passengers per year as they fly to 370 destinations in 59 countries, said the companies.

The merger is seen as part of an industry-wide move by airlines to survive in the crisis-stricken industry.
Airlines around the world are grappling with high fuel prices, growing competition from low-cost carriers and a traffic slump caused by the recession, tighter security after attacks, and crisis events such as last month's Icelandic volcano.

However, not everyone would be pleased with the merger.

"Consolidation gives them (airlines) more leverage. (But) as a consumer, you will have less choices, fewer routes, higher prices and more fees," Scott Sonenshein, an assistant professor at the Jones Graduate School of Business at Rice University, told the New York Times.

Source: Global Times


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