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Mating Season Opens In The Air - Will You Merge WIth Me?

Continental, United could be the next big airline merger

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Apr 15, 2008

Continental Airlines Inc., the biggest carrier at Newark liberty International Airport, and United Airlines may be pushed into a merger as the pending tie-up of Delta Air Lines Inc. and Northwest Airlines Corp. threatens to create a bigger, more-powerful

UAL Corp.'s United, the second-largest U.S. airline by traffic, and Continental, No. 4, discussed a possible link as Delta and Northwest intensified talks, a person with knowledge of the matter said in February.

A United-Continental combination would be the world's biggest carrier, vaulting past Delta-Northwest and current No. 1 American Airlines. United-Continental would have Atlantic and Pacific route networks and hubs including New York, Los Angeles and Chicago, the three biggest U.S. cities.

"It's inevitable,'' Robert Mann of R.W. Mann & Co., a Port Washington, N.Y.-based consultant for airlines and unions, said in an interview. "United has been pushing so hard for it, and this does meet Continental's test that they don't have to do anything unless forced to by other competitors.''

Ned Walker, a spokesman for Houston-based Continental, and Jean Medina, a spokeswoman for Chicago-based United, declined to comment on possible mergers.

Delta also considered whether to link up with United, and Continental met with American.

The Continental-United pairing would have sufficient reach to challenge a merged Delta-Northwest in both the U.S. and international markets. Those two combinations would leave AMR Corp.'s American as the only airline among the five largest in the U.S. without a partner.

Bringing together United with Continental may produce $890 million in added revenue and cost savings, Frank Boroch, a Bear Stearns & Co. analyst in New York, estimated in a report in February.

Continental Chief Executive Officer Larry Kellner said on Feb. 15 that his airline was in the early stages of talks with United. Former Continental CEO Gordon Bethune, who was succeeded by Kellner in 2004, said in an interview late Monday the airline needs to merge.

"Most of the structural things have been tacitly understood and negotiated,'' between United and Continental, he said. "They probably need about two weeks to dot every I and cross the T's.''

Continental, United could be the next big airline merger

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