UAL chief backs consolidation
UAL Corp. Chief Executive Glenn Tilton renewed his call Tuesday for consolidation of the U.S. airline industry, but the company declined to comment on reports that UAL was discussing merging its United Airlines with Continental Airlines.
UAL said nothing publicly at its first investor day in years about rampant talk on Wall Street that it might be preparing a bid for Continental or Delta Air Lines Inc.
Tilton didn’t discourage it either, however, repeatedly citing the potential combinations with other carriers as “opportunities.”
The company declined to comment on a report on the New York Times’ website that, citing unidentified people involved in the negotiations, said the carrier had held preliminary merger talks with Continental.
The report said Tilton and Continental CEO Larry Kellner had met in person to discuss a combination, although the discussions were characterized as far from complete and no deal was imminent.
The Wall Street Journal on its website reported that UAL and Continental Airlines had been talking for months, and that discussions had become more urgent in the wake of US Airways Group Inc.’s hostile offer for Delta.
United spokeswoman Jean Medina said Tuesday night that the Elk Grove Township, Ill., company did not comment on rumors or speculation. A message seeking comment was left after business hours at Continental’s headquarters in Houston.
Through the first half of this year, United was the No. 1 carrier at Los Angeles International Airport with a market share of about 16%. Continental was a distant eighth with a 3.6% share. United also has a hub in San Francisco, which serves as a jumping-off point for much of its Asia service.
Because of Continental’s relatively minor presence in the region, a merger of the two carriers “would mean next to nothing on the West Coast,” said Alan Sbarra of Roach & Sbarra Airline Consulting in San Francisco.
That said, Californians could benefit from easier access to Continental’s extensive Latin American route system. The carrier is also a leading provider of service to Europe through its Newark, N.J., hub.
A United-Continental pairing could face significant obstacles. Northwest Airlines Corp. might be able to stop it under a 2000 agreement with Continental that gives it the right to block certain business combinations. But with U.S. airlines strongly interested in consolidation, it’s possible that differences could be resolved in separate deals.
