United & US Airways Merger Talks Underway, Continental Totally Jealous?
Here’s the story so far… Heroine with a shady past finally finds a nice man with whom she wants to spend the rest of her life.
They’re picking out the china patterns when suddenly her rich ex-boyfriend comes into the picture: the same ex-boyfriend who left our heroine standing at the altar two years ago. Seeing her with another guy has reawakened that tender feeling.
“Let’s give it another shot,” he says.
Is this a scene from a soap opera on the CW?
No, this is the latest from the love-triangle merger talks of United Airlines, US Airways and Continental Airlines.
The rumor mill had already been churning this week with news of a possible union between United Airlines and US Airways.
Some analysts say the talks with US Airways may have been part of a ploy to lure Continental back to the bargaining table.
If United is successful in its efforts to merge with US Airways, it would become the second-largest U.S. carrier, edging out American Airlines.
The merger would also push Continental into a distant fourth place spot, a scenario that might have pressed the carrier into action.
On the other hand, if United chooses to rekindle its relationship with Continental, a merger between the carriers would create the largest airline in the world.
Take a look back to 2008 and the last major merger when Peter explained What’s Next for the Delta-Northwest Merger?
As far as revenue is concerned, a United-Continental marriage would add $5.8 billion in market value to the two companies. That is a whopping 95 percent over the value of the airlines separately.
The gains of a United-US Airways combo would be more modest. The merger would create only $2.5-$3 billion in market value, a 65 percent increase.
However, United has more in common with US Airways, so their union would be more harmonious and less complicated than a deal with Continental. Continental’s high labor costs, fleet structure and strict regulatory standards clash with United.
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The company has been talking merger with Continental and US Airways for the last four years. Here is a brief relationship history:
February 2006: United emerges from a four-year Chapter 11 bankruptcy protection— the largest and longest airline bankruptcy case in aviation history.
December 2006: Preliminary talks with Continental Airlines start.
June 2007: CFO Jake Brace says his company is still looking to tie the knot with a suitable merger partner.
February 2008: United and Continental began advanced stages of negotiations.
April 2008: Continental breaks off negotiations, but announces it will join United in the Star Alliance.
April 2008: United and US Airways reportedly are in advanced merger talks following Continental’s vote not to pursue a merger
June 2008: CEOs of both United Airlines and Continental Airlines sign a “virtual merger” that includes many of the benefits of a merger without the actual costs and restructuring involved.
April 2010: The New York Times reports that United Airlines was “deep in merger discussions” with US Airways. Continental is rumored to be rethinking a United merger.
Whichever suitor United ultimately chooses, it is still uncertain whether the benefits will translate to consumers. A merger would improve service frequency and schedule offerings, but consolidation may lead to higher fares.
By Adriana Padilla for PeterGreenberg.com.
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