DALLAS/MINNEAPOLIS (AP) — The biggest airline in the world will have the United name, Continental’s globe logo and potentially far-reaching effects on air travel.
Shareholders who approved combining the two companies Friday hope the new airline attracts more top-dollar corporate travelers with its larger network while reducing costs. Some industry watchers say the deal will lead to higher fares, but United and Continental say there’s enough competition from low-cost airlines to keep prices from rising.
The vote for the deal topped 98 percent at both companies, which expect the $3 billion stock swap to close in the next two weeks after loose ends are tied up. Regulators in the US and Europe have already signaled approval.
With the voting over, the real work begins. Passengers won’t notice changes immediately, but behind the scenes the airlines will be combining two separate groups of highly unionized workers, merging reservations systems and putting new paint jobs on the planes. The companies expect it will be at least a year before federal authorities approve their request to fly as one airline.The UAL acquisition of Continental will combine United’s strength in the Midwest, the West Coast and across the Pacific with Continental’s presence in Texas, the East Coast and routes to Europe and Latin America. Measured by traffic — the number of miles flown by paying customers — the new United will leapfrog Delta, Air France-KLM and American Airlines to become the world’s biggest airline.
Shareholders of United parent UAL Corp. will own 55 percent of the new company, to be called United Continental Holdings Inc. and based in United’s hometown of Chicago. It will be led by Continental Airlines Inc. CEO Jeff Smisek.
United and Continental overlap on few routes, but Rick Seaney, CEO of FareCompare.com, said he still expects the deal to affect how passengers fly and how much they pay.
“Losing a major competitor is likely to make prices rise — all things equal on the economy and fuel prices,” he said.
United and Continental say they compete with low-cost carriers on about three-fourths of their US routes, which will help keep fares down.
Kevin Mitchell, president of the Business Travel Coalition, said most of his corporate clients that he’s talked to assume prices will rise.