Merger gets clearance

ASSOCIATED PRESS

The world's biggest airline will have the United name, Continental's globe logo, and potentially far-reaching effects on air travel.

Shareholders who approved combining the two companies Friday hope the new airline attracts more top-dollar corporate travelers with its larger network, while reducing costs. Some industry-watchers say the deal will lead to higher fares, but United and Continental say there is enough competition from low-cost airlines to keep prices from rising.

The vote for the deal topped 98 percent at both companies, which expect the $3 billion stock swap to close in the next two weeks after loose ends are tied up. Regulators in the United States and Europe have already signaled approval.

With the voting over, the real work begins. Passengers won't notice changes immediately, but behind the scenes, the airlines will combine two groups of highly unionized workers, merge reservations systems, and put new paint jobs on the planes. The airlines expect it will be at least a year before federal authorities approve their request to fly as one airline.

The UAL acquisition of Continental will combine United's strength in the Midwest, the West Coast, and across the Pacific with Continental's presence in Texas, the East Coast, and routes to Europe and Latin America. Measured by traffic - the number of miles flown by paying customers - the new United will leapfrog Delta, Air France-KLM, and American Airlines to become the world's biggest airline.

Shareholders of United parent UAL Corp. will own 55 percent of the new company, to be called United Continental Holdings Inc. and based in United's hometown near Chicago. It will be led by Continental Airlines Inc. chief executive officer Jeff Smisek.

Smisek hinted Friday at layoffs, saying there would be overlapping jobs when the two combine. He did not give numbers.

United and Continental overlap on few routes, but Rick Seaney, CEO of FareCompare.com, said he still expected the deal to affect how passengers fly and how much they pay.

"Losing a major competitor is likely to make prices rise - all things equal on the economy and fuel prices," he said.

United and Continental say they compete with low-cost carriers on about three-fourths of their U.S. routes, which will help keep fares down.

Kevin Mitchell, president of the Business Travel Coalition, of Radnor, said most of his corporate clients he's talked to assume prices will rise. But he said many thought fare increases would be offset by new or better discounts for big travel customers.

The history of the airline industry has been littered with mergers that did not work out as well as planned.

The 2005 deal to combine US Airways and America West is still plagued by animosity between two labor groups.

A look at the airlines that are merging.

United

Headquarters: Chicago.

Founded: 1926.

Employees: 46,000.

Daily flights: 3,400.

Destinations: 230

in the United States and abroad.

2009 revenue:

$16.3 billion.

2009 loss:

$651 million.

Continental

Headquarters: Houston.

Founded: 1934.

Employees: 40,000.

Daily flights: 2,700.

Destinations: 269

in the United States and abroad.

2009 revenue:

$12.6 billion.

2009 loss:

$282 million.

SOURCES: United, Continental, Bloomberg News

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