Blloomberg: If deal is done, Continental is seen the boss
"If deal is done, Continental is seen the boss"
Better management cited
Posted by the Asbury Park Press on 12/15/06
BLOOMBERG NEWS SERVICE
UAL Corp.'s United Airlines employees may end up taking orders from the management of smaller rival Continental Airlines Inc. should the two carriers decide to merge.
UAL Chief Executive Officer Glenn Tilton's public advocacy of airline consolidation doesn't mean that he'd stay around to run a United-Continental combination, said Julius Maldutis, president of New York-based Aviation Dynamics Inc.
"Continental will be the one who will be doing the acquiring, not United," Maldutis said Wednesday as the merger talks were disclosed by people familiar with the discussions. "They've got a stronger management. They've changed the culture at Continental. Tilton and company want to cash out."
A tie-up between United, based in Elk Grove, Illinois, and Continental, Newark Liberty International Airport's largest carrier, would create the world's largest carrier by passenger traffic, overtaking AMR Corp.'s American Airlines. With no public proposal on the table, Maldutis and other analysts are assessing what a merged carrier might look like.
Under CEO Larry Kellner, Houston-based Continental is one of the best-managed U.S. airlines, said Jon Ash, president of InterVistas-GA2 consulting firm in Washington. Its shares have more than doubled this year to lead the Bloomberg U.S. Airlines Index.
"If there is a combination, I'd see Continental taking over United and, in effect, running it," Ash said.
Kellner, 47, took the reins at Continental in 2004 from CEO Gordon Bethune, who restored profits after 10 years on the job. Kellner joined Continental in 1995 as senior vice president and chief financial officer, and he was promoted to president by Bethune in 2001.
The airline posted profits in four of the past six quarters. Fourth-quarter earnings are projected at 25 cents a share, according to estimates from 10 analysts compiled by Bloomberg.
Analysts Susan Donofrio of Cathay Financial and Jamie Baker of J.P. Morgan Securities Inc. this week revised their outlook for the quarter to a loss from a profit after the airline forecast higher costs and lower-than-expected revenue.
"Continental is the prettiest girl at the dance party right now," said Darryl Jenkins, an independent airline consultant in Marshall, Va. "They're the best-managed among the legacy carriers over the longest period of time.'
Continental has declined to comment on the merger talks. United spokeswoman Jean Medina said the carrier has "a solid platform with the right team and the right plan that is delivering results."
Shares of Continental (CAL) fell 42 cents, to $44.34, in New York Stock Exchange composite trading. UAL's shares (UAUA) declined 69 cents, to $44.55, in Nasdaq Stock Market composite trading"