United and Continental expected to announce merger

Continental Airlines and United Airlines could announce a deal to merge as early as Monday, according to reports.  A merger between Houston-based Continental and Chicago-based United would form the worldÔÇÖs largest airline. Based on passenger miles flown in 2009, the combination would be about 10 percent larger than the current world leader, Delta Air Lines. United is currently the third-largest US carrier, and Continental the fifth. The board of UAL Corporation, which owns and operates United Airlines, is meeting Friday, while Continental's board is meeting Friday and Sunday to discuss the deal, according to industry insiders. This week, United posted a first-quarter loss of $82 millionÔÇöfar narrower than the $382 million loss it made during the same period a year earlier. Revenue rose by 15 percent to $4.2 billion. It is thought that Jeff Smisek, Continental's CEO, would become CEO of the merged carrier; and Glenn Tilton, UAL's CEO, would become non-executive chairman for two years, after which Smisek would take over that role too. Continental is expected to allow the combined airline to be based in Chicago and retain the United name. However, Houston would remain a large hub, since it is a gateway to Latin America. It is possible, however, that some European flights could be shifted to United's Washington hub from Houston. Continental's hubs are in Houston, Newark and Cleveland. It has a large presence in Latin America, where it is the number two airline behind American Airlines. United's hubs are in Chicago, Washington and Denver. It also has major operations in San Francisco and Los AngelesÔÇöboth gateways to Asia, where it also has a large presence. There are concerns that passengers could face higher fares in the short term, especially where flights on overlapping routes are cut. However, there are not many overlapping routes, so only some flight elimination is likely. Out of Houston, for example, Continental operates 54 weekly flights to Chicago, while United operates 35. Airlines usually adopt the policies of the company that charges higher fees when they combine. Delta Air Lines, for example, increased some fees after acquiring Northwest Airlines in 2008. The talks between Continental and United reportedly began two weeks ago, though neither has publicly confirmed the discussions. The two airlines reached a similar point in merger negotiations almost two years ago; but Continental's board elected to remain independent at a very late stage in negotiations. United's Tilton has pursued consolidation for several years, negotiating alternately with Continental and US Airways.