Monday, September 6, 2010

United and Continental Airlines Set to Merge

The aviation industry is to reach a major milestone with the merger of the United Airlines and Continental Airlines. The proposed merger received the go ahead from the US Justice Department (DOJ). All antitrust concerns have been addressed by DOJ and the overall review is also complete. Voting by the shareholders remains the final step before the deal falls through. The voting is likely to be carried out on 17th September. After that it would be a matter of receiving the approval of the US Transportation Department. It is expected that the entire event would be wrapped up by 1st October, 2010. Here are some of the major highlights of the merger.

Financial Perspective

The all stock merger is reported to be worth about $US 3 billion and would create the biggest airline in the world. Airline sources indicated that some $1 billion to $1.2 billion is projected to be realised from annual synergies by 2013. It includes about $200 million to $300 million in annual cost synergies.

Scope of the Merger

A look at the current operations of Continental and United reveals the immense dimensions of the merger. Continental handles over 2,700 departures serving about 170 points throughout the world and has about 40,000 employees. United, on the other hand, is the founder of the Star Alliance and employs nearly 40,000 personnel. The company operates some 3,400 flights a day to over 230 destinations. The coming together of these two giant entities clearly spells as the creation of a mammoth in the aviation industry.

Future Leadership

Leadership positions would be filled in from the talent pool of both the companies. Both United and Continental are expected to contribute about the same number of members to the new management team. Other than Glenn Tilton and Jeff Smisek from United and Continental respectively, the new Board of Directors will be comprised of two union directors and an equal number of independent directors of both companies.

Benefits for Customers

The merger blends award winning customer service with industry leading network carrier. The merged company would fly the latest fuel efficient fleet (adjusted for cabin mix) and will also have the finest order book amongst the leading network carriers of the US. Customers will get to access the services of the number one frequent flyer programme in the industry. Earning and redeeming endless miles spread across a plethora of destinations with more and more partners will benefit the passengers immensely. Attractive new features will be added besides combining the features of Mileage and OnePass (the loyalty programmes of Continental and United).

Employee Benefits

A performance oriented incentive programme would be awarded to employees and there would be focus upon goal sharing. Another thrust area would be the creation of cooperative labour relations, which would include negotiating contracts with collective bargaining units that would work both for the employees and the company. Both airlines have stated that frontline employees would hardly be affected. Reductions would come in mainly from retirements, attritions, and voluntary programmes.

Source: Southall Travel News

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