Airlines Approach Final Deal to Merge
By GINA CHON And SUSAN CAREY
Continental Airlines Inc. and UAL Corp.'s United Airlines are expected to announce Monday that they are merging to form the world's largest airline, people familiar with the matter said.
UAL's board of directors is meeting Friday, while Continental's board is meeting Friday and Sunday to discuss the deal, these people said.
These people cautioned that negotiations could still fall apart as they did in 2008, when Continental backed away. But after a hiccup over pricing, the talks appear on track, they said.
The combination would leapfrog over Delta Air Lines Inc. as the biggest airline by passengers carried.
United is much stronger financially than it was in 2008. This week, United posted a narrower first-quarter loss of $82 million, compared with a year-earlier loss of $382 million. Revenue rose by 15%, to $4.2 billion.
A weekend impasse over which share-price ratio should be used to calculate the deal's value appeared to resolved itself as UAL's share price declined this week. The market is now expecting a swap of about 1.057 UAL shares for each share of Continental.
United had wanted the exchange terms to be based on the closing price of its stock on the day before any agreement is signed. But that would lower the value for Houston-based Continental shareholders, since UAL shares have climbed more than Continental's since United's interest in a merger was disclosed earlier this month.
Continental's board met Wednesday and agreed to continue the talks. It was also asked to consider a range of prices in an effort to resolve the share-swap disagreement, those people said.
In 4 p.m. trading on the Nasdaq Thursday, UAL shares were down 1.3% to $21.47, while Continental shares were up 2.4% to $22.70 on the New York Stock Exchange.
Continental already has agreed in theory to allow the combined airline to be based in Chicago, United's home base, and to retain the United name, according to those people familiar with the matter.
Jeff Smisek, Continental's chief executive officer, would become CEO of the merged carrier; Glenn Tilton, UAL's CEO, would become non-executive chairman for two years, after which Mr. Smisek would take over that role too, those people familiar with the matter said.
Sooooooooooooo... This is not good news for us at all. Even though Greg is employed by a certain Regional (he asked me not to specifically name them in the blog anymore), we were really