Is a Continental/United merger in play again? (updated)

Justin Baer reports in the Financial Times that United Airlines may consider rekindling merger talks with Continental Airlines:

United Airlines is considering a new round of talks to merge with Continental Airlines if its negotiations with another rival, Delta Air Lines, end without an agreement, people familiar with the company's plans said.

Glenn Tilton, United chief executive, an outspoken proponent of industrywide consolidation, signalled on Friday that the Chicago-based airlines could still strike a deal even if Delta merges with Northwest Airlines. Delta opened negotiations with both United and Northwest earlier this month, the people said.

[snip]

United and Continental discussed a possible merger a year ago after US Airways made a hostile bid for Delta, which was then under bankruptcy protection, the people said.

Those talks cooled after Delta rejected US Airways' advances, but the two sides remained in touch, they said.

[snip ....] United and Continental will probably need to wait for their peers to reach a deal before they sign their own accord; Northwest has the right to block a Continental merger under most conditions. Continental in turn can buy out that so-called golden share for $100 once Northwest reaches an definitive agreement of its own.

The Chicago Tribune's Julie Johnsson reports that one past stumbling block may not be now:

[United] was on the verge of combining with Delta a decade ago, but the deal fell apart over labor issues, sources say. And United has talked repeatedly with Continental but could never sort out ego concerns, like which team would run the company.

That's less of an obstacle this go-round, since Tilton appears more open to ceding control, say people close to United.

But that creates uncertainty as to whether Chicago's hometown carrier still would be based here after a merger.

A Continental/United merger would create a massive consolidated airline, but I think many Continental frequent travelers (not to mention executives) share my concerns over any merger that might displace Continental's excellent management team. This could get interesting if United is serious about a merger in which the smaller airline's management team gets to run the show (it's just hard to imagine that United is serious).

UPDATE (01-25-2008): The Chronicle decided to cover one aspect of this story today. Note the following paragraph from reporter Bill Hensel:

That 2006 agreement, provided United almost $5.5 million in financing to assist with the build-out of office space, along with as much as $10 million in fuel tax relief, if the carrier moved its corporate headquarters downtown from suburban Elk Grove Village instead of out-of-state. In return, United promised to remain on Wacker Drive, staffed with no fewer than 325 full-time workers, for at least 10 years.

If that seems really familiar, that's because it is! Here is the paragraph in the Jan. 20 Chicago Tribune article (linked above) that Hensel apparently lifted and rewrote only slightly:

In 2006, the City of Chicago offered United $5.5 million in tax-increment financing and up to $10 million in fuel-tax relief as incentives to move its corporate headquarters downtown rather than out of state. In exchange, United agreed to remain at 77 W. Wacker Drive, staffed with at least 325 full-time workers, for at least 10 years.

We're pleased we could help the hometown newspaper cover the hometown airline, but here's a little hint for the future: Using Google News alert emails will allow you to grab and rewrite copy from other newspapers much more quickly! In the internet age, your turnaround time should really be better than five days.

Posted by Kevin Whited @ 01/24/08 12:14 AM | Print |

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