United and Continental Airlines on Monday announced they have agreed to merge and create the world's largest carrier by traffic. The new carrier will be called United and will keep the headquarters in Chicago. But the Continental CEO will run the combined carrier.
MICHELE NORRIS, host: The title of world's largest airline might be soon be changing hands. United and Continental announced today that they've agreed to merge. And if approved by shareholders and regulators, the new combined airline would surpass Delta as the world's largest in terms of the number of passengers carried. It's a $3 billion-plus deal, with United buying Continental. The new effort would keep the United name and Continental's logo of a twirling globe.</s>MICHELE NORRIS, host: NPR's David Schaper reports.</s>DAVID SCHAPER: It's been a rough ride for commercial airlines in recent years. First, skyrocketing fuel costs cut into revenues. Then losses were compounded by the global economic crisis and recession. The five big legacy airlines: American, Continental, Delta, United and U.S. Airways have lost a combined $29 billion over the last five years.</s>DAVID SCHAPER: So, it is within that context that Continental and United see merging operations as the best way to strengthen themselves. Continental CEO Jeff Smisek.</s>Mr. JEFF SMISEK (CEO, Continental Airlines): We are creating an airline here today that has a far brighter future than either of us individually could've ever created on our own.</s>DAVID SCHAPER: If the merger is approved by shareholders and federal regulators, Smisek would run the new United Airlines. And he says it will be a good deal for all concerned.</s>Mr. JEFF SMISEK (CEO, Continental Airlines): This merger benefits all our stakeholders. Our customers, we're providing an unparalleled global network on a single carrier.</s>DAVID SCHAPER: United in particular has been looking for a merger partner for some time, as it's had a particularly bad decade. The huge slump in air travel following the September 11th terrorist attacks accelerated United's fall into bankruptcy in 2002, and it didn't emerge from Chapter 11 protection until 2006. In fact, United reached a tentative agreement to merge with Continental two years ago, but Continental backed out because United was in much weaker financial shape then.</s>DAVID SCHAPER: United has used the last two years to trim capacity and other costs to make it a stronger partner while flirting with other possible merger mates, including U.S. Airways. But at the airline's merger announcement in New York today, United CEO Glenn Tilton said Continental is the one that fits in with United best.</s>Mr. GLENN TILTON (CEO, United Airlines): This is not a defensive combination of companies. This is a combination of companies that creates future opportunity. It creates future value for shareholders. It creates future opportunity for employees. And it creates an enormous opportunity for customers that they didn't previously have.</s>DAVID SCHAPER: For international travelers, that appears to be true. Industry analysts say Continental is strong in Central and South America, while United's strengths are to Europe and the Pacific. Vicki Bryan of the New York based corporate research firm Give Me Credit is one of many financial analysts applauding the merger.</s>Ms. VICKI BRYAN (Financial Analyst, Give Me Credit): This is a situation where you have two very complimentary market profiles. They have very little overlap in the same markets. They have no overlap overseas.</s>DAVID SCHAPER: Airline officials say they don't plan to eliminate a lot of jobs because of the merger, though some redundant positions will be cut from both Continental's headquarters in Houston and United's home offices in Chicago, where the combined airline will reside. The employee unions for the two airlines, while not rushing to embrace the deal, suggest they may be able to support it with the exception of United's flight attendants who say they need a new contract before any merger can go through. So, what can airline passengers expect?</s>Professor AARON GELLMAN (Professor of Management in Transportation, Northwestern University): Higher prices is certainly the most likely result. I mean, I think it's inevitable.</s>DAVID SCHAPER: Aaron Gellman, professor of management in transportation at Northwestern University says the continued consolidation of U.S. airlines into bigger and bigger behemoths should certainly give federal anti-trust regulators reason to thoroughly review, if not question, the United-Continental merger. The Justice Department says it plans to do just that. Officials for the airline say they hope to have the deal finalized by the end of the year.</s>DAVID SCHAPER: David Schaper, NPR News.