Newsstand - Continental Abandons Merger Talks With United

Continental Airlines said Sunday that it had abandoned merger talks with United Airlines (http://www.nytimes.com/2008/04/28/business/28air.html?hp) and was planning to remain an independent carrier, a blow to lengthy efforts by United to find a merger partner.

Continental’s decision, announced by the airline Sunday afternoon, will change the complex game of musical chairs that the airline industry is playing after the merger announcement last week by Delta Air Lines and Northwest Airlines.

Continental’s move was a stunning development for United’s parent, UAL, which had been negotiating in expectation of reaching a deal by late this week. As recently as Friday, it looked as though Continental, based in Houston, and United, based outside Chicago, were on the way to reaching a merger agreement.

Continental decided to drop the discussions after UAL announced worse-than-expected earnings, which sent shares falling last week. On Tuesday, United said it lost $537 million during the first quarter, on sharply higher costs for jet fuel. The airline, which spent more than three years under bankruptcy protection earlier this decade, said it would cut flights and eliminate a further 1,000 jobs.

Directors at Continental, who met Sunday afternoon, feared that a merger with United could put their company in peril. Continental, which had been expected to take management responsibilities in a deal with United, survived two bankruptcy filings of its own in the 1980s and 1990s, and has been considered one of the industry’s best-run carriers.

Continental Airlines said Sunday that it had abandoned merger talks with United Airlines (http://www.nytimes.com/2008/04/28/business/28air.html?hp) and was planning to remain an independent carrier, a blow to lengthy efforts by United to find a merger partner.

Continental’s decision, announced by the airline Sunday afternoon, will change the complex game of musical chairs that the airline industry is playing after the merger announcement last week by Delta Air Lines and Northwest Airlines.

Continental’s move was a stunning development for United’s parent, UAL, which had been negotiating in expectation of reaching a deal by late this week. As recently as Friday, it looked as though Continental, based in Houston, and United, based outside Chicago, were on the way to reaching a merger agreement.

Continental decided to drop the discussions after UAL announced worse-than-expected earnings, which sent shares falling last week. On Tuesday, United said it lost $537 million during the first quarter, on sharply higher costs for jet fuel. The airline, which spent more than three years under bankruptcy protection earlier this decade, said it would cut flights and eliminate a further 1,000 jobs.

Directors at Continental, who met Sunday afternoon, feared that a merger with United could put their company in peril. Continental, which had been expected to take management responsibilities in a deal with United, survived two bankruptcy filings of its own in the 1980s and 1990s, and has been considered one of the industry’s best-run carriers.


^^ I am glad Continental has chosen to stay independent.

Not a huge fan of UA anyway :D

I have a feeling that many of us that become part of the NW/DL diaspora will find a new home at CO.

Bravo, Continental. The US will still have at least one decent airline left.

It's a pity Northwest didn't have the same fortitude.

Bravo, Continental. The US will still have at least one decent airline left.

It's a pity Northwest didn't have the same fortitude.

had northwest had the same fortitude CO would not have been able to even discuss this with UA, ironically.

Considering UA reported one of the heaviest losses since emerging from Chap11, CO's move is a smart one (http://www.fleetbuzzeditorial.com/2008/04/28/continental-plots-new-flightplan/).

If the DL/NW merger goes through, CO will jump to the oneworld alliance. It'll build on the dominance of the N.Atlantic market between Heathrow & the USA with AA and BA.

If the DL/NW merger goes through, CO will jump to the oneworld alliance. It'll build on the dominance of the N.Atlantic market between Heathrow & the USA with AA and BA.

CO miles for BA TATL F ^^^

Presumably we'd lose the VS partnership though

If LH takes its majority stake in BMI and doesnt sell to VS, VS risks being a fringe airline in LHR.

With Open Skies here, CO could afford to drop VS...

Continental Rejects Merger Overtures (http://online.wsj.com/article/SB120933331731448075.html?mod=hps_us_whats_news)
Move Marks RebukeTo Rival United; Shifting Alliances?
By SUSAN CAREY and MELANIE TROTTMAN
April 28, 2008; Page A1

Abruptly ending talks with United Airlines parent UAL Corp., Continental Airlines Inc. said it would stay independent for the time being despite efforts by rival carriers to merge.

The Houston-based airline didn't disclose details of talks in its statement late Sunday and didn't name potential partners. But its move was seen as a rebuke to Chicago-based UAL, which has been trying to interest Continental in a marriage for years.

UAL had recently entered formal merger talks with Continental, said people familiar with the matter, giving UAL the impression that it had the inside track on striking a deal with one of the U.S. industry's healthiest carriers.

<snip>

Continental is seen as a prize by many in the industry. It has a powerful hub in Newark, N.J., serving Europe and the domestic market, a strong network to Latin America from its hub in Houston, a seasoned management team, good labor relations, a young, fuel-efficient fleet, and a reputation for better service than some of its peers.

Those same qualities also make Continental an attractive partner for global airline alliances, and the company said Sunday it was interested in reviewing alternatives in that area. Such alliances stop short of mergers, but they allow airlines to more easily share passengers among each other. Over the years, major airlines around the globe have adopted such agreements to expand their reach.

American Airlines parent AMR Corp. has been trying to interest Continental in such an alliance, both with itself and within oneworld, a global marketing alliance anchored by American and British Airways PLC, said the people familiar with the matter.

Continental is currently a member of the competing SkyTeam alliance. Delta and Northwest are also part of that alliance, and their merger agreement could create one outsize airline that eclipses its smaller partner.

I, too, am glad to see CO taking measured steps (http://www.wanderingaramean.com/2008/04/more-merger-mania-news.html) in this environment rather than rushing into something. It would be particularly interesting to see CO jump ship to OneWorld, but who knows if that will happen. CO is still a small carrier relatively speaking. They're number 4 in the USA, but the margin between them and #3 is pretty wide. That could prove troublesome in the long term, though they do seem to have a pretty reasonable plan for measured international growth (assuming the 787s ever arrive) and their domestic routes seem pretty decent, except for the hole on the left side of the country.