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Continental expected to make UAL bid---article

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General Lee

Well-known member
Joined
Aug 24, 2002
Posts
20,442
Continental expected to make United bid
By Linda Loyd -- Philly Inquirer Staff Writer
Tue, Apr. 13, 2010

A Wall Street analyst expects Continental Airlines to bid to acquire United Airlines, after reports that United and US Airways were in merger talks.

Stifel Nicolaus airline analyst Hunter Keay said in a client note Monday that a United-US Airways merger is "a suboptimal scenario" because of pilot labor issues, revenue risks, and "problems with regulatory review due to higher domestic overlap" on routes United and US Airways have in common.

"We expect Continental to respond to reported United-US Airways merger plans with a bid for United," Keay wrote, "partly as a defensive maneuver. . . .We expect Continental to respond relatively quickly." Keay said he had no knowledge of merger negotiations or discussions between Continental and United.

Industry observers acknowledge that Continental is a better match for United. "But it takes two to agree," said aviation consultant Robert W. Mann, of Port Washington, N.Y.

Continental and United discussed merging in 2008, until Continental walked away.

A combined United-Continental would create the world's largest airline, ahead of Delta Air Lines, now the largest after acquiring Northwest Airlines in 2008. A combined US Airways-United would be the second-biggest U.S. carrier. Delta and Air France-KLM are larger worldwide.

Continental's strong presence in New York and in Pacific markets would complement United, said Gimme Credit L.L.C. bond analyst Vicki Bryan in a client note. A United-Continental combination "could generate nearly $2 billion in revenue and cost savings, perhaps twice the benefits" of a United-US Airways merger, she wrote.

Continental has more cash - $2.9 billion - vs. US Airways' $1.3 billion and "stronger free cash flow as a percentage of revenue, and slightly lower leverage," Bryan said.

Keay said a United-US Airways merger would "seriously jeopardize" the joint ventures Continental and United had been pursuing to coordinate on scheduling and pricing.

A United-Continental merger would face less regulatory scrutiny because the carriers have fewer overlapping city pairs - nine, whereas United and US Airways have 14.

Keay said that, in a United-US Airways merger, proposed service or job reductions at Philadelphia International Airport "would be met with pushback" by politicians, possibly including U.S. Sen. Arlen Specter (D., Pa.), who protested when US Airways closed its Pittsburgh hub in 2006.

"We see potential political and/or legal issues with the handling of US Airways' Philadelphia hub, given the relatively close proximity to United's Washington Dulles hub," Keay wrote.

"We see a high likelihood of forced asset divestitures at Philadelphia or Dulles, and Phoenix or San Francisco, given hub redundancy."

Gimme Credit's Bryan noted, "US Airways lacks the rich appeal of new markets."

United and US Airways' overlapping markets - such as Washington - could result in reduced market share "if the combined carrier was required to sell common slots, for example, before the merger could meet regulatory approval," Bryan said.

Most airline CEOs, including United's Glenn Tilton and US Airways' Doug Parker, have touted the benefits of more industry consolidation.

In 2002, Tilton was recruited to United, after nearly three decades in the oil industry, to turn around the troubled Chicago-based carrier. Hit by competition from low-fare carriers, United's labor costs were among the highest in the industry. Two United passenger planes were hijacked in the Sept. 11 terror attacks.

After United filed for Chapter 11 bankruptcy reorganization, management in 2003 eked out hefty concessions from unions that saved about $2.5 billion.

"United flight attendants and pilots have been at war with the company since the restructuring," said Mann. "It wasn't a small haircut. These were scalpings."

US Airways filed for bankruptcy protection twice in the last decade and was saved from liquidation in 2005 by combining with America West Airlines, of Tempe, Ariz.

Parker, with America West since 1995, became CEO of the new US Airways. Under his leadership, US Airways improved operational problems at Philadelphia International Airport - uneven baggage service, and one of the worst records for on-time flights.

Parker made an unsuccessful hostile bid for bankrupt Delta in 2006. US Airways tried to combine with United in 2008, but United walked away.

One of US Airways' biggest unresolved headaches from its 2005 merger has been integrating its pilots and flight attendants, which are split on seniority lines - with more-senior crews employed by the old US Airways and less-senior personnel working for the former America West.

"US Airways hasn't been able to run one airline," said Mann. "They still operate on two separate contracts. They still fly on two separate fleets."

If United and US Airways merge, seniority integration of the workforces will have to be resolved. Management has to be "willing to pay to play," Mann said.

"I think they could convince people who are today opposed to a merger to participate. They are going to have to share the economics," Mann said. "If they try to do it cheap, chances are they'll have a lot of resistance."




Wow, I didn't see this one coming...?!!?? Hey IAHERJ, what were you saying about 70 seat SCOPE? Sure, they will dump all of them IMMEDIATELY if it happens.....riiiiight. Enjoy!


Bye Bye--General Lee
 
Last edited:
General, Tuesday, April 13 called. They want their story back.


I didn't see it as a thread, and it SURE DOES need to be talked about. Say again about 70 seat scope? Riiiight........Good luck.


Bye Bye--General Lee
 
I didn't see it as a thread, and it SURE DOES need to be talked about. Say again about 70 seat scope? Riiiight........Good luck.


Bye Bye--General Lee


All coming from the starfish with 76 seat scope.
Tard
Soon to bend over for more seats.
 
All coming from the starfish with 76 seat scope.
Tard
Soon to bend over for more seats.

There aren't any 76 seaters at UAL? If there are, they are COMING to CAL, along with more large props. And as far as adding more seats at DL, that rumor is totally false. Oh well, sounds like you are the tard. Regardless, ENJOY!

Bye Bye--General Lee
 
March 2008, CAL could of had UAL at 1/4 the cost with all the benefit. Today CAL gets to pay through the nose! The CAL pilots will now be using their much anticipated raise to fund the new more expensive deal. Nice work IAHRJ loser!

And if CAL doesn't win the bidding war with LCC it will cost CAL even more being the smallest fish in the Star.
 
March 2008, CAL could of had UAL at 1/4 the cost with all the benefit. Today CAL gets to pay through the nose! The CAL pilots will now be using their much anticipated raise to fund the new more expensive deal. Nice work IAHRJ loser!

And if CAL doesn't win the bidding war with LCC it will cost CAL even more being the smallest fish in the Star.

I love you guys. You really do hope CAL ties up with United and all the CAL pilots get screwed and or our careers are stagnated. General, why does it seem you will only be happy if CAL pilots are somehow negatively impacted by a merger or a lousy contract etc? Very sad. Do you see CAL guys wishing ill will towards other legacy airlines? I feel for you guys. Going to take some time off from flightinfo. This crap is so sad. Got bigger issues to deal with this week/weekend like riding a bicycle 182 miles for a great cause in the name of someone who happens to have MS. Makes all this stuff seem so trivial. I'm going to go get a life. I hope you guys do the same.

IAHERJ(the loser)
 
March 2008, CAL could of had UAL at 1/4 the cost with all the benefit. Today CAL gets to pay through the nose! The CAL pilots will now be using their much anticipated raise to fund the new more expensive deal. Nice work IAHRJ loser!

And if CAL doesn't win the bidding war with LCC it will cost CAL even more being the smallest fish in the Star.


Why is it you keep refering to the CAL pilots as the ones who have a say in this merger process? We have no more say than the man in the moon. We can attempt to put a wrench in things and gum up the works like we did with DAL in 1998 but it this economy and in these M&A times, I doubt we or any other group could do it again.

Second, what makes you think that CAL will use their money? It's plainly obvious that you seem to have no concept of how an actual merger process wourks.

Third, since you are not on our MEC or negoiating team, how can you say our "raise" is lost on a merger with UAL? Do you have some God-like, third eye you see through or is it just your ssahole again that you seem to constantly be talking out of?
 

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