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Old 26th April 2008, 11:09 AM
Gerald A Gerald A is offline
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Default American In Talks With Continental, US Air

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April 26, 2008

American Airlines has had early-stage merger talks with US Airways and is in advanced talks for an alliance with Continental Airlines, sources briefed on the situation said on Friday.

News of the talks comes after Delta Air Lines and Northwest Airlines announced nearly two weeks ago they planned to merge to become the world's largest airline, seeking to counter rising fuel prices, a weak economy and a growing competitive threat from European carriers as trade barriers fall on trans-Atlantic travel.

American Airlines' talks with Continental are focused on forming an alliance that could share passengers, much like the SkyTeam partnership that includes Air France-KLM, Alitalia, CSA Czech Airlines, Delta and Northwest Airlines, the people said.

Alliances have flourished in the industry because they generate profits through marketing programs and flight code-sharing without the headaches of combining operations.

But Continental is also in advanced talks with United Airlines for a full merger, the sources said. Continental will choose either the merger or the alliance, not both, sources said.

Meanwhile, United Airlines is also in serious merger talks with US Airways, and will choose to merge with either Continental or US Airways soon, the people said.

American's talks with US Airways were not serious at this point, one person said.

Aviation consultant Bob Mann said a US Airways-American Airlines merger would not be a marquee matchup and would give American, currently the largest US carrier, little extra depth overseas.

"It doesn't match Northwest-Delta and it would not match the global presence of a Continental-United, if that were going to happen," Mann said. "But I think if Delta-Northwest does happen and Continental (and United) does happen, about the only thing left on the board is US Airways."

All of the airlines declined to comment.

Continental, which has said it would prefer to remain independent unless the competitive landscape changes, had laid most of the groundwork for a merger with United even before Delta and Northwest announced their deal, the sources said.

Under the terms being negotiated, Continental Chief Executive Larry Kellner would be CEO of the combined airline and UAL CEO Glenn Tilton could be chairman, the people said. Other details are still being negotiated in what would be another all-stock deal.

Combining United with Continental would create a company with a combined USD$35 billion in revenue and nearly 100,000 employees, surpassing the Delta-Northwest combination.

But that merger may not happen. United Airlines, whose shares plunged 40 percent when it reported a quarterly loss earlier this week, is also talking to US Airways.

Analysts have said a merger of United and US Airways would be less complex than a United/Continental combination.

JP Morgan analyst Jamie Baker said earlier this week a deal between United and US Airways could be easier when it comes to aligning pilot pay, combining fleets and cutting flights and seats.

Baker also said the merger would be easier because United and US Airways already have code-share agreements and are part of the Star Alliance.

"United was interested in America West in 1998, US Air in 2000. Today, both are available under one roof," Baker said. America West and US Airways merged in 2005.

After racking up USD$35 billion in losses and finally emerging from a five year slump in 2006, US airlines are hoping mergers could give them greater market power to reduce flights and raise fares.

The airlines also face a renewed sense of urgency to cut costs as jet fuel prices have more than doubled since the start of last year.

The carriers will be forced to make decisions in the coming weeks as they would like to have any mergers approved under the administration of President George W. Bush, which is considered more merger-friendly but ends in January.

All talks have been ongoing since January this year, after people heard that talks between Delta and Northwest had become serious. Delta and Northwest announced their merger April 14 in an all-stock deal then valued at just above USD$3 billion.

The Justice Department has said it would, if necessary, weigh multiple merger proposals in the airline industry and try to complete any reviews before the Bush administration leaves office.

While there is broad industry belief that the Northwest/Delta combination stands a good chance of being approved, some competition experts believe a follow-on deal could face a tougher challenge due to a further narrowing of competition that could lead to higher fares and fewer choices for travelers.

(Reuters)
Gerald
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  #2  
Old 26th April 2008, 06:43 PM
NickN NickN is offline
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Sounds like a very incestuous affair! Can't wait to see who chooses who.
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  #3  
Old 29th April 2008, 08:30 AM
Gerald A Gerald A is offline
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Default Continental Not Merging With United

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April 28, 2008

Continental Airlines has called off talks with United Airlines because of United's weak financial condition and a feeling that a merger would risk its own financial health, a source briefed on the matter said.

The source also said Continental is in "advanced talks" with British Airways and American Airlines about a potential alliance, with plans to seek antitrust immunity.

Continental's decision comes after Delta Air Lines and Northwest Airlines said nearly two weeks ago they planned to merge and become the world's largest airline, seeking to counter rising fuel prices, a weak economy and growing competition from European carriers as trade barriers fall on trans-Atlantic travel.

Continental said on Sunday in a letter to its employees it has chosen not to merge with any other airline but will continue to consider an alliance with other carriers.

"We have significant cultural, operational and financial strengths compared to the rest of the industry, and we want to protect and enhance those strengths -- which we believe would be placed at risk in a merger with another carrier in today's environment," Chief Executive Larry Kellner and Vice President Jeff Smisek said in the letter.

Continental's decision comes a few days after United's shares dropped more than 40 percent in one day when it posted a loss of USD$537 million in the first quarter.

One source familiar with the matter said the development came as a surprise to United, which had been negotiating in expectation of reaching a deal by late this week.

After racking up USD$35 billion in losses and finally emerging from a 5 year slump in 2006, US airlines are hoping mergers could give them greater market power to reduce flights and raise fares.

The airlines also face a renewed sense of urgency to cut costs as jet fuel prices have more than doubled since the start of last year.

Continental, which has said it would prefer to remain independent unless the competitive landscape changes, had laid most of the groundwork for a merger with United, sources had said.

Under terms that were being negotiated, Continental's Kellner would have been CEO of the combined company and Smisek would have been president, sources said. United CEO Glenn Tilton was to get a seat on the board of the combined company.

But talks broke off this weekend, with Continental now focusing on an alliance with BA and American.

Airline alliances allow partners to streamline costs while sharing revenues. Without antitrust immunity, the data and revenue shared on the routes would normally be considered collusive.

American and British Airways have tried twice, without success, to win immunity from the government for their transatlantic alliance.

Regulators have long been concerned that stronger ties between American and BA would jeopardize competition at London's Heathrow Airport for other US carriers.

But air travel restrictions have eased under a US-European Union "Open Skies" agreement that took effect in March, creating new opportunities for transatlantic air services.

Earlier this month, the US Department of Transportation granted tentative antitrust immunity to the SkyTeam alliance involving Delta, Northwest, Air France-KLM and Alitalia.

Continental, which has a marketing alliance with SkyTeam but was not part of the group that received antitrust immunity, will review its participation in that alliance.

American Airlines is part of the 10 member oneworld alliance, which includes BA, Cathay Pacific, Finnair, Iberia and Japan Airlines. But Continental's talks, for now, would focus on grouping with only BA and American.

This paves the way for a deal between United Airlines and US Airways, which have had serious merger talks of their own, according to sources briefed on the matter.

UAL's market value stands at USD$1.8 billion, while US Airways is valued at USD$657 million, one of the lowest among major carriers.

A United-US Airways deal foundered in 2001 on antitrust concerns. But consolidation proponents say the industry and the two carriers have changed dramatically.

Both have restructured hubs and routes during long periods in bankruptcy, and United has reduced domestic capacity to focus more on international routes.

Analysts have said a United-US Airways merger would not be very complex as wages at the two carriers are closely aligned and their fleets mesh well. The two are also part of the same global marketing alliance.

(Reuters)

Gerald
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  #4  
Old 29th April 2008, 11:18 PM
Gerald A Gerald A is offline
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Default United, US Airways In 'Very Advanced' Merger Talks

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April 29, 2008

United Airlines and US Airways are in "very advanced" merger talks, two sources with knowledge of the matter said on Monday.

A deal, one of the sources said, could be finalized within the next couple of weeks, and could include significant cuts in capacity.

The discussions intensified over the weekend after Continental Airlines, which had been in negotiations with United, pulled out to explore a potential marketing alliance with American Airlines and British Airways.

(Reuters)
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  #5  
Old 30th April 2008, 11:38 PM
Mike Scott Mike Scott is offline
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Most employees want nothing to do witha a US Air merger...its a lose/lose deal given the recent union issues as they tried to merge with the America West employee groups. US Air employees have been almost as badly treated as we have by management etc so its a double negative if you merge those two groups..plus US air brings nothing to the table in the way of complimentary route structures etc. We are all hoping that the CO thing goes thru at some later date...we figure the negative was the drop in stock price after the quarterly earnings (loss) was announced. Bottom line is its all about money...so if the price is right the deal will be done.

MS
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Old 1st May 2008, 12:42 PM
Gabriel S. Gabriel S. is offline
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Ugh, not US. Pleeeaase not US...

A UA/CO merger would be valuable for both parties given their very different route networks. US would give UA little more than headaches. Mike is spot on.
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  #7  
Old 1st May 2008, 01:10 PM
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Montague S Montague S is offline
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why would CO want the baggage of UA?
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Old 1st May 2008, 02:14 PM
Gabriel S. Gabriel S. is offline
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Quote:
Originally Posted by Montague S View Post
why would CO want the baggage of UA?
UA has an excellent route network which, I think, would complement CO's perfectly.
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Old 1st May 2008, 02:19 PM
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Montague S Montague S is offline
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Originally Posted by Gabriel S. View Post
UA has an excellent route network which, I think, would complement CO's perfectly.
it also has a much older fleet and a shocking financial position...CO has better relations with its staff, much more advanced computer technology and a far better codesharing network...taking the mess of UA onboard would be a negative for CO.
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Old 9th May 2008, 04:39 AM
Gerald A Gerald A is offline
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Default United Pilots Say US Air Merger Should Be Last Resort

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May 8, 2008

The union representing pilots at United Airlines said on Wednesday a merger with US Airways should be a last resort.

The Air Line Pilots Association said in a statement it had "serious concerns" that a merger would not yield the financial benefits some industry experts predict.

United and US Airways are in advanced merger discussions, according to sources with knowledge of the matter, although neither carrier has confirmed the talks.

Many airline experts believe consolidation is the best way to stabilize an industry battered by high fuel costs and low-fare competition.

But the pilots' union said that "the highly-touted financial benefits to be derived from such a merger are unlikely to be achieved because these benefits are based on assumptions that have no basis in reality."

The union said the financial benefits of a merger are dubious, given the labor unrest at US Airways, which merged with America West in 2005 and has yet to integrate its labor groups.

Further, a deal is unlikely to receive approval from the US Justice Department, the union said.

(Reuters)

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