Continental/United Merger - Death of a Houston Company

I know everything there is to know about airlines.

 

take these with a grain of salt. the first one was last updated 3 years ago, and i'm not sure about the second. both are set at $50,000 annual.


Chicago is 47% more expensive than Houston.
Housing is the biggest factor in the cost of living difference.
Housing is 143% more expensive in Chicago.

http://www.bestplaces.net/col/?salary=50000&city1=54835000&city2=51714000



The cost of living in Chicago, IL is 36.6% higher than in Houston, TX. Therefore, you would have to earn a salary of $68,291 to maintain your current standard of living.

Employers in Chicago, IL typically pay 6.1% more than employers in Houston, TX. Therefore, if you take the same type of job in the same type of company in Chicago, IL you are likely to earn $53,032.

http://swz.salary.com/costoflivingw...omemetrocode=34&newworkmetrocode=34&x=49&y=14

 

As with everything else in life, you get what you pay for.

 

Except that its not smart when youre paying more for the same thing.

 

Out of all the legacy carriers in the US, Continental is arguably the best. Delta is pretty good too. After those two, there is a sharp drop off with crappy Northwest and American and United. Continental always gave me good customer service too because the reps I spoke with were friendly Houstonians.

 

Not surprising considering all the consolidation going on in the airline industry. Hopefully, nobody here is affected. You can probably expect American to be the next "big" carrier to attempt a merger -- probably with US Airways. In the event that happens, the only major domestic airlines worth mentioning will be Delta, American, United and Southwest. In other words: good for the airlines, bad for consumers.

 

This AND Halliburton... what next?

 

Air Tran is by far the best airline

 

I work for CO downtown. So far we only know what's in the news. My old boss (who just left the company) doesn't know anything and he has no reason to keep secrets now.

I figure three possibilities are I could keep my job and move to Chicago, keep my job and stay in Houston or get laid off. Whatever happens will probably not affect us for a few months to a year (hopefully).

Obviously it's the main "office gossip" now.

With the headquarters move and name change it does not seem as if CO is getting many consolations. It's almost as if we are getting bought.

 

Continental was pretty good when I used it to fly... probably better than AA and United... I can say Delta was probably the best out of those 4.

 

I understand why you would think American & US Airways might combine, but I question what value US Airways would bring to the table. For several reasons, I think that carrier is destined to fail. If a merger with AA happens, the terms for US Airways employees would not be favorable at all.

B4L, "good for the airlines, bad for consumers" is a bit simplistic. It's a complicated subject.

111chase111, people like you at Smith have the most to worry about. It won't be pretty. It's very doubtful you'll have the option to keep your job and stay in Houston. It isn't that CO is getting bought because CO's management team will (for the most part) control the combined carrier, but duplicate corporate jobs have to be eliminated and Chicago will be HQ. Houston will be reduced to being an operational hub city. Your boss did good for himself by leaving on his own terms. I suggest you polish up the resume and start looking around.

 

That is the slogan of the mewling masses.

You don't always get what you pay for. In fact, if you're a smart shopper, you get much more than you pay for, compared to the average shopper.

 

I find that hard to believe, the $1000 figure sounds too low to me. Is the area you are in not only strategically located but also a nice place to live? Is it at least at the socioeconomic level of The Heights/Galleria/Midtown areas in Houston?

You can get some 1-bedroom apartments near the Galleria for around $600 by the way, albeit in older apartments. So there is still a $300 premium in Chicago. Sure, it is not the same as paying close to $2500 per month in DC, but it is still more expensive.

Add to this list the cost of gas in Chicago, which I believe is consistently the highest in the nation.

 

Luckily NASA is still alive and strong here.....oh wait

 

Yeah, they're definitely an airline with major some identity issues. Technically, they're a major airline yet they're not much of a player in global travel nor are they a low-cost domestic carrier. I can definitely understand why people think they're not equipped for long-term survival. All the same, they seem destined for a merger. It's clearly the direction this industry is moving in and they've tried to initiate a merger on a number of occasions in the past.

As for my "good for the airlines, bad for consumers" comment. I realize it is a bit simplistic but assuming these mergers happen with minimal problems (i.e. strikes, integration/technical issues, etc) the airlines get what they want by reducing competition thereby paving the way to increased fares and consumers are stuck paying it. I'm speaking more-so to element of competition and how having a variety of options benefits the consumer. Less carriers, less options.

 

Ironically, I did a group presentation in B-school 2 years ago about CO merging with United if the industry further consolidated (this was before Delta/NW).

If my analysis is still relevant, it was determined that United is the best merger partner with CO for the following reasons:
-Frequency and fly through rights in China
-West Coast hubs and only 10% domestic flight overlap
-Cost savings (SGA (United = 81% unionized), advertising expenses, plane sales)
-Economies of Scale (Negotiating plane purchases and fuel, lower costs per customer)
-Increasing high-value corporate accounts, as merged company increases destination options

 

Some of us at CO said 15 years ago that UA was the best merger partner because of their perfectly meshing hub networks. This was when the CO board surprisingly shocked everyone and chose a NW alliance over a DL merger. The route structure of the combined UA/CO will be the envy of the industry. If labor issues don't chop the new carrier off at the knees, it will end up being the strongest of the emerging carriers without much doubt.

 

http://www.chron.com/disp/story.mpl/business/6986235.html

Continental, United airlines agree to merge
Deal would create world's biggest airline and take carrier's headquarters out of Houston
By JENALIA MORENO
HOUSTON CHRONICLE
May 2, 2010, 5:03PM

The deal is done: Continental and United airlines have agreed to merge.
Both company's boards met on Sunday and approved the merger, according to sources familiar with the proceedings. A formal announcement comes early Monday.

The carrier will be based in United's home of Chicago and take United's name, the sources said. Jeff Smisek, chairman, CEO and president of Houston-based Continental, will be CEO of the merged carrier and he will have offices in Houston and Chicago, they said.

United's CEO Glenn Tilton will become non-executive chairman until Dec. 31, 2012, or on the second anniversary of the closing of the deal, whichever is later. Then Smisek takes the helm as chairman.

The deal — which had earlier bogged down over price — will be an all-stock swap. Continental shareholders get 1.05 United shares for each Continental share they own.

That values the deal at about $3.2 billion, based on Friday's closing share prices and the latest publicly available outstanding shares. United's shareholders will own a 55 percent stake in the merged company with Continental's shareholders holding the remaining 45 percent.
Houston is expected to be the largest hub of the combined carrier and continue to be its gateway to Latin America. Continental employs 16,500 people in Houston and the sources said it should remain a top private employer in the city.

Jobs at the combined carrier will be cut by attrition, retirement and voluntary programs but the sources said Houston employment may grow in the long term since Houston will likely add destinations.

“The employees at the Houston hub, they are going to stay there. It's the most profitable of the Continental hubs,” said Pete Garcia, president of aviation consulting firm Pete Garcia International. Garcia isn't involved in the transaction, but he's familiar with both airlines' operations.

The jobs most at risk are probably in administration and reservations, said Garcia, who was a Continental vice president until starting his own firm more than two years ago.

Besides Smisek, other management members have yet to be named, but leaders are expected to come from both airlines.

The combined airline's board of directors will have 16 members, including Smisek, Tilton, two union members and six directors from each of the company's boards. United has 13 board members now, including Tilton and two union members. Continental has 10 board members including Smisek and no union members.

The combined company will have annual revenues of $29 billion, based on 2009 numbers and the combination will create savings of $1 billion to $1.2 billion annually by 2013. The new entity will have $7.4 billion in cash, based on the first quarter of 2010, sources said.

The merger is expected to close by year's end, pending shareholder and regulatory approval.

The new carrier will serve 370 destinations and 59 countries. It will continue operating hubs in Houston, Chicago, Newark, Cleveland, Los Angeles, San Francisco, Denver, Washington, D.C., Guam and Narita, Japan.

Two years ago, Continental and United came close to merging but Continental officials decided to remain independent, instead forming an operational alliance with United by joining the Star Alliance.

Less than three weeks ago, they returned to the negotiating table soon after it was revealed that United was in merger talks with US Airways. The Tempe, Ariz.-based airline announced on April 22 it had ended talks with United.

 

There is a reason US Airways hasn't found a merger partner despite trying to do so continually: Nobody wants them. The only reason UA spoke to them recently was to prod CO into action. Mission accomplished. Once CO came to the party, US was dropped like a rock. This might be the only smart thing Glen Tilton has done (besides surviving his own incompetence these many years) since taking over UA.

I hope AA merges with the piece of garbage known as US Airways because it will make them weaker. As a former (longtime) CO employee, I still despise AA for a lot of reasons. Yes, I admit bias.