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.
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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
11 comments:
Brittney:
Way to hang it out there - hope you don't mind a few points from a 20 yr CAL wife?
a) CAL runs ALPA now. No merger will happen without ALPA signing off first. With the USAir DELTA examples fresh in everyone's minds, labor, especially unionized labor, holds some powerful cards.
b) United needs this more than CAL does. But, the engagement has gone on long enough and the merger should progress to marriage. We'll see how list integration goes but an adjustment to date-of-hire is a serious possibility - that will favor CAL.
c) You realize that an airline "career" isn't a 21st century choice? I suggest you and your husband get something else going. Even during the last years of the 20th century you needed a second career to backstop the airline option. You love animals? There's a growth industry.
d) Buy all the CAL memorabilia you can - United's logo/brand will survive and you should be able to sell the CAL stuff to collectors in a few years. Can you say retirement plan?
Take Care--Lee
Lee, I still don't understand what you think CAL has to GAIN by this merger. I really think nothing good can come of this. Other mergers such as Delta-Americawest have been a pretty big disaster. My husband has jumpseated with crews comprised of one of each pilot that fought the entire flight and did not get along. There are STILL issues with how they merged their seniority. I also think you are naive about ALPA helping CAL. Sorry, but the senior guys at CAL are totally out of touch with what the newer guys are dealing with. It's easy to judge when you can sit pretty and not be affected by things. You obviously didn't read my entire blog, because my husband has 15+ years in aviation and spent a year and a half during furlough looking at other career options. He is not new to this career. I would never suggest you tell your husband to find something else to do. He's great at his job and feels passion for it unlike anything else he's explored doing. While I hate the industry, I totally support him. I will take your advice on getting CAL merchandise, but that's about it. I'm sorry, but I don't think you know what you are talking about.
Seems like every trip I took with hubby in 2007, he'd introduce me to the captain and say "Hey, this is ____, it's his last month before going to Continental." We wonder where those guys are now.
I feel for you. It's all a crap shoot in this industry. It makes me nervous when (if) the time comes for us to make a similar decision to leave the regionals.
You hear the US Air/America West merger horror stories, so hopefully management will play it wiser. Delta/Northwest seemed to go much smoother, but of course you'll always have losers in the situation.
I think the general consensus is to see shrinkage at the regional level, growth at mainline to create a vacuum upward....not the other way around. Should be interesting to see how this pans out for everyone.
I don't really know what to think of all this yet.
My overall attitude with life is to just go with the flow, and I am keeping that attitude with this as well. Who knows what will happen...my big concern is closing down CLE. We just bought a new house and I feel like we are settling down here for good...all to be uprooted again? But, maybe they will grow CLE bigger than ever. Who knows?
Hey, at least we are all in this together :)
Hi girls, thanks for your support :) I hate to be negative, but I feel like if you've been through what we've been through, you start seeing things differently. Joanna, I worry for you guys. My husband predicts that if the seniority merges the way he thinks it will, it will go by date of hire. UAL has guys furloughed with dates of hire back to like 1998. So there is potential for those UAL furloughed guys to come back and bump a couple hundred CAL pilots off the seniority list, which is our fear. Greg said he's already seen UAL pilots distributing their version of the seniority list in the forums and it shows them with the upper-hand. We've been on the receiving end of UAL's rath before (ACA) and they always seem to get their way, even if CAL is supposed to be the managing entity here. I just see UAL wanting this deal for the cash and doing everything they can to take advantage of the situation to make it come out with them on top. I'm not optimistic that this will be a good thing, especially not for those on the bottom half of the seniority list. I hope I'm wrong.
Also, I see nothing wrong with doing a side gig or thinking of alternate careers if you have something that will work. I don't feel like we really have that going for us though, other than my career. I wish we could go back to Greg's college days and he could major in engineering and he could do that as a career. But at this stage of life with him at 38 years old and us hoping to start a family soon, a total reset would be tough for us to do. He spent the last year and a half considering other options and applying for many many jobs and nothing really worked. He just really wanted to go back to flying, despite everything. It's not like he didn't try to find something else to do. Anyway, we'll see how things play out. Hopefully it'll go better than I predict...
My husband doesn't seem worried about losing his job, so that means I really don't worry. As for his hire date, DH may very well have a hire date of 99...he was with XJet and I know his hire date for non-rev purposes is 99, so I am not sure how that translates to a merge. Plus, with all the retire guys coming up, I would imagine that furloughs would get called back. Plus, CAL is understaffed...so maybe this merge will call everyone back. I don't know...I really don't get into all the details of all this. I just hope for the best.
I hear you on the life reset at 38...I don't think anyone could do that, especially a pilot who is very much geared towards flying. I think it is times like this where we all wish our husbands did something different, something more stable. But, then they wouldn't be who be the person we fell in love with and married :)
Joanna, I was talking to DH this morning and he said that existing pilots at both CAL and UAL should be ok- none that HAVE jobs will lose them (in theory). The integration he's worried about is the furlough integration/seniority list. There are 1400+ furloughed UAL pilots and of course the 147 at CAL. Almost all of those will be above Greg if they go by hire date, which is why he knows he's screwed. I also recently saw the list of combined retirements for the two airlines and it is this:
Combined Retirements
2012 270
2013 418
2014 429
2015 387
Going by that, it will be about 5 years til enough pilots retired that he would be needed, and that's assuming staffing levels for pilots stay where they are, which some people speculate they will not after the merger. It's all kind of up in the air. Hopefully you guys will be ok. My hubby thinks CLE will still exist, but just be a smaller hub. Same with Denver. Good luck to you guys!
Brittney,
I was searching the internet looking for views about the integration of the two groups.... I'm one of those 1400 furloughed pilots from United. Been furloughed since Nov 2001. If this business has taught me anything, its... well, not to put our lives on hold. Move on and just do the best you can with what you have been given. Myself, well I currently work full-time and run two businesses on the side. I can definitely relate to your concerns... but I'm fairly confident that date of hire will not prevail. With the ALPA merger policy we will probably see something much closer to the Delta/Northwest integration. It is my hope that all furloughed pilots will return to their rightful positions. Unfortunately, it doesn't matter what we think because someone who has their own agenda will make the decision for us. Best of luck to you and your husband... look forward to seeing you on the line... Tim sgbcrew@ gmail. com
Tim - "not putting your life on hold" is very true!
A couple months ago DH and I were talking about adding onto our house/buying new. DH kept saying "not until we sign a contract". Then...he flew with two captains who give him the same message "don't put your life on hold". It was the best thing that could have happened because it was really a lightbulb moment. So, we started to househunt, and found a great house.
Brittney, as for the furlough list, I have no clue. I would hope that the decision makers would make room for the furloughs. Heck, 147 isn't a large number, so why wouldn't they just throw these guys in.
That is great that he thinks CLE will exist! I like hearing that. The media here is all "CLE is going to close" and it is just grating on me.
I seldom leave comments on blog, but I have been to this post which was recommended by my friend, lots of valuable details, thanks again.
Hello to all.
I also am a twice furloughed UAL 1999 hire. My "crystal ball" viewpoint is built on past treatment of junior UAL pilots. I sincerely believe that the UAL ALPA "agenda" has always and will continue to be focused on making every decision based on one question "What can we do to benefit our senior pilots." This leads to safety for the returned/junior CAL pilots as UAL will be willing to negotiate the timetable of return for furloughed UAL pilots (as well as their placement on the integrated seniority list) based on the belief that we, the furloughed are mereby sacrifical "bargaining chips" which can be thrown into any contract negotiation to improve sections of the contract/seniority integration for themselves, the senior pilots. Thus any and all interest by CAL at the bargaining table in "protecting" the interest of their junior pilots will result in UAL ALPA casting their furloughee chips on the table in a giveaway attempt (gesture of good will?) toward future negotiation benefit directed at the senior pilot core. I further believe that UAL ALPA is quite "concerned" that when the remaining UAL furloughees do come back they will not be happy campers having been sold out twice (possibly have 1400+ pilots leading charge for in-house union/mmmmh). In this they are correct. Had UAL gone forward to merge with the USAir debacle I for one would have done my part to vote against ALPA representation. At UAL it is all and entirely about benefits for the senior pilots. The misguided rational at leaving the junior pilots interests unrepresented is "they will benefit when they become senior pilots themselves." Unfortunate for me was the timing of my decision to exit my Air Force career in 1999 for the "greener grasses" of commercial aviation, my choice of airlines (I liked the mountains of Colorado) and my decision to wait out/return to UAL after my first furlough. I started out expecting a 31yr career, spent 6 of 12 on furlough, and now am looking at only 19 remaining (overly optomistic as recall will not happen this year). When UAL thinks "junior pilots" those on furlough represent over 20% of the pre-merger pilots on property...quite a number for ALPA to discount as "bargaining chips" but for which they chose not to fight for time and time again (two furloughs/first furloughed pilot group in ALPA history to not be granted longevity for pay, etc). Thus my advice is to enjoy the time you have on the line (a sincere congrats on recall) but definitely look out for #1 with potential secondary plan as ALPA UAL will welcome you with open arms/just not protection and/or representation. The best of luck to you!
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