Tags: US | Airlines | Talks

Sources: United, Continental Airlines Closer to Deal

Friday, 30 Apr 2010 10:55 AM

 

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United Airlines and Continental Airlines Inc. are moving closer to announcing as early as Monday that they will combine to form the world's largest carrier by passenger traffic, according to people familiar with the matter.

Continental's board plans to meet Friday and Sunday to consider a deal, according to one person familiar with the discussions but who was not authorized to speak publicly about it.

Another person briefed on the talks said Thursday that negotiators have agreed that the combined company would be called United, it would be based in United's hometown of Chicago, and run by Continental CEO Jeffery Smisek with United CEO Glenn Tilton as chairman. All those decisions would need approval of both boards.

The companies declined to comment.

It was unclear whether the companies had settled differences over price. United and Continental executives were said to be negotiating this week over how to value each other's shares for a stock-swap transaction.

Published reports said United was insisting that shares of its parent, UAL Corp., be valued at their closing price the day before a deal is announced. That could result in a smaller share of the combined company for Continental shareholders because UAL stock has risen more sharply than Continental's since April 7, when reports first surfaced that United was seeking to combine with another carrier.

The same companies reached this stage two years ago, but Continental walked away from a deal, saying it was risky to merge with another carrier during a time of high oil prices and big losses in the airline industry.

That deal collapsed shortly after UAL lost more than $500 million in the first quarter of 2008, news that sent its stock market value plunging by 35 percent.

UAL appears to be in better shape now than it was in 2008. Last week, the company reported a smaller-than-expected $82 million loss for the first quarter of 2010, and revenue jumped 15 percent — the biggest increase among the six largest U.S. carriers — amid signs of a gradual recovery in air travel.

If they combine, United and Continental would leapfrog over Delta Air Lines Inc., which became the world's largest airline when it bought Northwest in 2008.

United's Tilton has relentlessly pursued consolidation for several years, negotiating alternately with Continental and US Airways Group Inc. US Airways ended the most recent talks last week as speculation increased about a United-Continental deal.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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