Saturday, September 18, 2010

United Airlines and Continental Airlines shareholders yesterday approved a US$3.2 billion merger that would create the world’s largest airline. 98% of shareholders approved of the deal.

In the deal, United stockholders will hold 55% of the company, while Continental stockholders will get 1.05 new shares for each Continental share and will hold the remaining 45% of the company. The deal was earlier approved by United States antitrust regulators. The new company, which keeps United’s name but Continental’s globe logo, has little overlap in its route network, and will be headed by Continental CEO Jeff Smisek.

The new company surpasses rival Delta Air Lines, which merged only a year ago, to become the world’s largest.

The airlines expect to complete the merger by October 1 of this year, and customers can expect to see major changes in spring 2011, when the new United will rebrand their kiosks, worker uniforms and airplanes. The new company is calling the day when they rebrand “Customer Day One”.

“Our stockholders recognized the value of bringing together Continental and United to create a platform for increased profitability and sustainable, long-term growth,” Smisek announced after the merger.

Some analysts agree. “No further obstacles to the merger are likely at this point,” Jim Corridore, Standard & Poor’s equity analyst, said to investors. Corridore also said that “we are positive on the planned merger, which we think creates an extremely strong global route network with opportunities for cost and revenue synergies.”

Other people were less positive about the merger. Rick Seaney, CEO of FareCompare.com, said that “losing a major competitor is likely to make prices rise — all things equal on the economy and fuel prices.” Also, a lawsuit in California accusing the merger of monopolizing the market and raising fares has been filed by lawyer Joseph Alioto, who claims that he represents consumers. United and Continental have defended themselves against accusations of monopolizing the airline industry by stating that they compete with low-cost carriers such as Southwest Airlines on three quarters of their US network. The airlines have also said that the low overlap and the low-cost competition will bring fares to heel.