United, Continental expected to sign off on merger
By Julie Johnsson
CHICAGO — United and Continental Airlines are expected to announce Monday that they are combining operations to create the world's largest airline, the culmination of more than a decade's effort by Chicago-based United to strike a megamerger that would transform the U.S. airline industry.
The transaction, which must still be approved by both airlines' boards, would be structured as a merger of equals, with neither side paying a premium for the other's stock, according to sources close to the talks.
The new airline, to be called United and based in Chicago, sources said, would bring together two carriers whose hubs and routes complement each other, giving management a shot at running a more profitable business in an industry plagued by overcapacity.
United's board is expected to vote today on the deal, which was reached in a flurry of negotiations that lasted less than three weeks.
Continental directors are meeting today to pore over the proposed transaction and are scheduled to vote Sunday.
Representatives for Continental and United would not comment on a possible merger.
The airlines stood in nearly the same position two years ago, with an apparent deal in hand, sources said.
But in a vote that shocked United's executives, Continental directors called off the merger on the eve of its announcement, deciding their carrier would fare better independently. They were spooked by operations problems at United, its labor discord and unexpected poor quarterly financial reports, sources told the Chicago Tribune.
Two years later, United has remade itself, earlier this week posting the best first-quarter results in a decade and besting its peers.
The Continental and United brands will likely remain in the market until the carrier receives a single operating certificate from the Federal Aviation Administration, a process that took the recently merged Delta and Northwest Airlines two years to accomplish.