United, Continental, Agree to Merge

The New York Times is reporting that United and Continental have agreed to merge. The airlines’ respective boards voted to approve the deal today, with a formal announcement expected Monday. It has already been reported that the combined carrier will retain the United name.

The Times reports that while the deal was agreed to quickly, with just under two weeks of negotiations, numerous hurdles remain before the combined carrier can fly: “The airlines need to win approval from the Justice Department’s antitrust division, a challenge given the renewed regulatory zeal in Washington. Unlike the Bush administration’s six-month review of the Delta-Northwest deal, analysts expect a lengthier and more complex review of this merger.

“The merger also needs the backing of employee unions, whose opposition to mergers in the past has undone many of the proposed savings. One factor in favor of the deal is that United’s pilots’ union indicated last month it would not oppose a deal with Continental, whose own pilots have so far remained silent.”

Once completed, the merged carrier will be the world’s largest, with roughly 21 percent of domestic capacity, compared to 20 percent for Delta. Think about that: Two airlines controlling almost half of the domestic air travel market.

More details are sure to come with the formal announcement Monday, so stay tuned, as this story is just getting started.

**UPDATE, Monday, May 3**

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It’s official—the merger is on. You can click over to www.unitedcontinentalmerger.com for all the details. The first thing you’ll notice is the new livery: United name, Continental logo and font. This, of course, is of little consequence to consumer’s wallets, but it’s an interesting approach to branding the new carrier.

The merger site claims several benefits for consumers, including a massive route network reaching 370 destinations in 59 countries. Few, if any, of these are new destinations, but are the result of bringing each airline’s routes under one roof. According to the merger site, customers should also expect a financially stable airline, “award-winning customer service,” and the industry’s “leading frequent flyer program.” If all of this sounds like public relations fluff, that’s because much of it probably is. But let’s save that for a later blog post.

The site also promises “competitive fares,” and makes this somewhat odd statement: “There has been, and will continue to be, strong competitive pressure on fares. Eighty percent of all domestic markets and 76 percent of all United and Continental domestic markets have access to travel on low-cost carriers. Today, low-cost carriers serve 92 percent of the joint airlines’ top 50 city-to-city routes.”

So even though United and Delta could potentially control 41 percent of the domestic market, fares will remain competitive? Credit where it’s due to the low-cost carriers, but consolidating half the domestic market share between two airlines doesn’t strike me as “competitive.”

More to come on the merger as the day progresses.