Continental/United Merger - Death of a Houston Company

What? We still have Halliburton. Go look at the new Fortune 500 list even, before you say the Dubai stuff.

And Houston would have been the better HQ choice than Chicago. It'll become evident in the next ten to twenty years.

 

About 2800 jobs will be moved to Chicago.

 

1) Price fixin's a lot easier with only 2 competitors versus 10

2) Demand for crappy service remains robust when there's only 2 competitors and they both suck too

2) Wall Street has shown that the too-big-to-fail model can insure a happy ending no matter how stupid and incompetent management might be

 

I'm not too worried. We still have NASA and Enron.

 

Chicago in line for huge lift with United-Continental merger

LINK

With the announcement that United and Continental airlines will merge and call Chicago home, the city of big shoulders gains important new bragging rights: home of the world's largest airline.

The deal, which was approved by the airlines' boards Sunday, represents a significant boost to Chicago's civic pride — and potentially to its economy, observers said.

After watching scores of iconic companies, from Amoco to Montgomery Ward, disappear through mergers and bankruptcies in recent decades, Chicago has notched two big corporate victories this year: Northfield-based Kraft Food's acquisition of British candy giant Cadbury, and the merged airline that will be named United.

With each such victory, Chicago is able to reinforce its identity as a global corporate center, adding prestige and more importantly, jobs.

"This is not only a big win for Chicago, but also for Illinois," said Samuel Skinner, a Chicago attorney who was transportation secretary under President George H.W. Bush. "Not only is United staying here, but United is getting bigger and stronger."

The airline mega-deal marks a new chapter in a history that dates to 1926. In the following decades, the city's transportation fortunes often were interlocked with those of United. O'Hare International Airport gained renown as the busiest in the world as United became a powerful international carrier, then lost that status to Atlanta in recent years as United flirted with liquidation in bankruptcy court.

The new United has the potential to transform the U.S. airline industry, analysts said. But whether it lives up to its promise will largely depend on how well Jeff Smisek, the Continental chief expected to be named the merged airline's CEO, connects with customers and employees.

"Airlines historically have not done so well with mergers," said Scott Sonenshein, a management professor at Rice University. "It can create a lot of opportunities, but people tend to overstate the benefits and underestimate the risks."

Longtime passengers of United and Continental will notice few immediate changes in service. Before the airlines can begin integrating fleets, they first must win approval of antitrust regulators, a process that could take a year, analysts said.

But the airlines already have combined or coordinated many aspects of flying, as well as their frequent flyer programs, as a result of an unusually close partnership they formed in 2008 following a failed merger attempt.

Since last year, Continental flights have departed from United's B concourse at O'Hare, the only U.S. domestic carrier that shares Terminal 1, considered United's crown jewel. And Continental announced earlier this year that it would stop serving free food on shorter flights, a perk United gave up years ago.

More importantly, the carriers don't expect to make heavy cuts to their flight schedules as a result of the merger. They will continue to fly to the 370 destinations currently served by Continental or United.

"You still have everything you had before," said aviation consultant Darryl Jenkins. "You have a great hub for United, American Airlines and Southwest. Chicago is as balanced as anywhere in the world is for air service."

The Continental deal is the culmination of a lengthy search by United Chief Executive Officer Glenn Tilton for a partner that would bolster his carrier's global network and promote consolidation in a fragmented industry plagued by chronic losses.

With civic leaders like retired ComEd CEO James O'Connor, former Illinois Tool Works Inc. chief James Farrell and former Board of Trade CEO David Vitale serving as directors on United's board, Tilton was mindful to ensure that United's deep ties to Chicago weren't damaged by his dealmaking, say people close to the carrier.

The new airline's corporate headquarters will be at 77 W. Wacker Drive in Chicago, where United currently employs about 700 people, sources said.

Of particular significance: Chicago also will be home to the operations headquarters for the new carrier. The crucial nerve center, along with 2,800 staffers, will be in Willis Tower, sources said, where the carrier recently leased 460,000 square feet subsidized by $35 million in city incentives.

"Any time the corporate headquarters for a company either comes to Chicago or it's enhanced, that just obviously means more jobs over time," said Harry Kraemer, former CEO of Deerfield-based Baxter International who is now an executive partner at private equity firm Madison Dearborn.

The headquarters status is so important that Texas lawmakers petitioned the carriers to reconsider Houston as word of the merger talks spread. That's because taxes and spending generated by thousands of white-collar jobs can be a boost to revenue-starved city governments.

"The salary dollars that go with a corporate headquarters are significant," aviation consultant Robert Mann said. "It's like trying to imagine New York City without Wall Street."

Chicago stands to reap even greater rewards if Smisek makes good on his vision for the new United.

Smisek is expected to sell the merger to Wall Street and to employees as producing a powerful carrier poised to reap the benefits of a rebounding global economy.

The new United is projected to generate cost and revenue synergies of about $1.2 billion annually, with between $800 million and $900 million of that gain flowing from its unparalleled global reach, said a person familiar with the deal. Executives expect to save $200 million to $300 million by reducing overhead and overlapping administrative functions.

That is lower than the $2 billion that analysts had anticipated, but the deal is nonetheless expected to be well-received by investors eager to see major U.S. carriers return to better financial health. Some pundits agree with Tilton that large-scale mergers, which would remove a glut of capacity, are necessary if carriers are to be able to raise prices to be financially viable over the long term.

"I think Wall Street is drooling over the prospect of some more consolidation in the airline industry," said Roger King, airline analyst with CreditSights Inc.

Since the Sept. 11 attacks sent the airline industry into a tailspin, United's focus has been on survival as it weathered crises from SARS to the Great Recession.

Shedding tens of thousands of workers and hundreds of aircraft, United is half the airline it was in 2000. The Continental merger provides the first real hope of reversing that trend.

Analysts expect the new carrier to trim operations in Cleveland, Continental's third-largest airport hub, given its proximity to O'Hare. But they think it unlikely the merger will lead to layoffs of pilots, flight attendants and other front-line workers. In fact, a source close to the carriers said they expect the tie-up to add jobs.

"I don't think anybody in operations is going to have an issue," said King. "I think the airline is going to grow, going to be strong."

 

too bad. CO was my airline of choice.

time to start using up my onepass miles before the airline gets trashed

 

Apparently they have a website about the merger too...

http://www.continentalunitedmerger.com/

Gives you a lot of details....

 

I loved flying Continental...my first job out of college, I worked at 1600 smith, where they were HQ'd...My old neighbor works there, so I'm sure she'll be gone...

Consolidation in the industry is bound to happen, but from a consumer standpoint, my options to compare prices just got fewer, thus prices, IMHO will go up, not lower...

 

Rumor has it that Exxon is moving it's HQ from Irving to Houston/The Woodlands :grin:

 

not related to the merger, but if they'll take bribes for flights, it's a pretty good bet they took some to move to chicago (rather than staying here)

http://www.washingtonpost.com/busin...44c496-566c-11e5-abe9-27d53f250b11_story.html

 

Eff him. He sold Houston out.

 

Even though I left Continental nearly 12 years ago, I still feel like celebrating. Today is a great day for the "ex-CONs" that work at the combined company. It's too bad United employees feel Jeff represented what Continental was all about.

Back in '04 when it came out Jeff was replacing Larry, it validated my decision to leave the company.

 

That merger should have never been allowed.

 

A kick back in Jersey.....No way.

 

Continental was the best.

 

I still have an envelope full of Continental drink coupons.

Of course, United won't accept them.

 

They should have kept the HQ in Houston with the merger. Would look pretty good right now with the energy slump. Houston needs to work on attracting operations for companies thar are not in energy. Service has just consistently gotten worse as "United" culture took over. Another ex Continental exec is taking over as CEO.

 

Continental was a much better airline than United and Bethune was a much better manager than Smisek.