iahflyr

CHICAGO (AP) - United Airlines could take its partnership with Continental Airlines deeper by joining up on things such as fuel purchasing and consolidating ticket counters, UAL Corp. Chairman and Chief Executive Glenn Tilton said on Thursday.

A team made up of three top people at both airlines, including the CEOs, has already met three times to explore some cost-saving measures they could both take, he said.

"Whether ground handling, fuel servicing, de-icing, catering, all of that affords an opportunity," Tilton said after a meeting of the CEOs in the 21-member Star Alliance. "Not all of it's going to be realized. But all of that forms the basis of a conversation," he said.

Such measures could end up saving the airlines a significant portion of the money they would have saved if they had merged, he said. The two had serious discussions in the spring but no combination came of it.

Airline teams like the Star Alliance sell seats and allow frequent fliers to earn and redeem miles on each other's flights. In addition, Continental Airlines Inc. and UAL Corp.'s United are also seeking antitrust approval for a trans-Atlantic joint venture that would allow them to share revenue in an arrangement that would also include Lufthansa and Air Canada.

Such arrangements need antitrust approval because airlines that used to compete on price on some routes end up coordinating prices and sharing the money — exactly the sort of thing that antitrust laws are supposed to fight.

Airlines argue that it helps travelers because they get a wider selection of flights and can more easily switch between carriers on long trips that might originate on one airline and end on a different one.

United and Continental would still compete on domestic U.S. service. And Tilton said their discussions about cost-saving measures in the U.S. would stay away from anything close to what he called the "bright line of pricing."

If the U.S. antitrust approval comes through, Continental would leave the SkyTeam alliance and join Star Alliance, probably late in 2009, Star CEO Jaan Albrecht said on Thursday.

Tilton said cost-savings discussions would not start in earnest until then. He said his managers at individual airports are eager to get started. When he asks them whether they could work with the managers at Continental to find cost savings if it was legally permissible, "I have not yet heard one manager say 'No.' All they really want to know is 'When can I talk to them?' "

Such arrangements are legally tricky but can be permissible if they're done right, said Ted Bolema, a former Justice Department antitrust attorney and now a principal at Anderson Economic Group. He said companies can ask the Department of Justice to review such plans beforehand, although the Department is not obligated to provide an opinion.

Star Alliance is getting bigger with or without Continental. On Thursday its member CEOs voted to add Brussels Airlines, a small Belgian airline with 300 daily flights, about one-tenth of United's schedule. In September Lufthansa bought a 45-percent equity stake, with an option for the rest in 2011.



One step closer to a merger? I like the idea. Maybe these cost savings will show UAL and CAL management that a full out merger will cut costs significantly.

WorldTraveler

Conventional wisdom is that a CAL/UAL merger is inevitable but I am beginning to have my doubts.

Given there is very little appetite in the banking/investor community right now to do ANY sort of deal, risking money on an airline merger seems especially untimely.

If one can gain 80% of the benefit of a merger with code sharing, etc, why go through the expense and hassle of a merger?

REAL Pilot

Because the bankers, lawyers and execs get millions of sweaty bills and get to move on to another raping. What more of a reason do they need?

Carpe Diem

Roger Ball

An airline is exactly where one might want to put one's money now, however...if only to gain the win-win scenario of high return if the airline succeeds and seizure of assets if they fail...frontier's loan is a good example. Without the ability to seize hardware it was a bad risk because of the high probability of failure, but they got the money because of the favorably dictated terms of high % on the loan and seizure of assets if it fails...it's just the nature of the beast in this godforsaken industry

WorldTraveler

Fortunately for the world, the era of money shuffling is now over. The greedy financiers will no longer be the tail wagging the dog. The banks will return to their traditional role of providing financial support to the real businessmen who need money to finance legitimate business transactions.

I guess that was my main point. The CAL/UAL merger now has to stand on its own business merits to get investors attention.

So to answer the question originally posed by iahflyer, this merger will only happen if there is a legitimate business case to be made. Perhaps, if the two airlines merged will result in less competition, higher ticket prices, etc will a business case be made.

As an aside, there was some discussion that the merger would need to be completed before Bush left office since he was viewed as more merger friendly. Right now, given the general panic in washington over the state of the economy, I think Obama and Democrats would have no problem signing off on a merger if union concerns were met and the case was made that it was necessary for survival and protection of jobs.

Ottopilot

Cost savings by eliminating my job. No thanks, no UAL, no merger!

iahflyr

Otto, why do you let that fear of mergers brainwash you??

Look at it right now. Who are the only two legacy airlines not furloughing? You guessed it, the only two who actually decided to merge. Stop living in fear and start to be optimistic, or at least a little more realistic. That pessimism won't get you anywhere.

Ottopilot

When the no furlough clause ends at DAL, you'll see furloughs. If we merge with UAL, there will be loss of pilot jobs. No brainwashing here. How's the coolaid in Houston? I do not like UAL. I do not have to like UAL. I do not have to like your merger dreams. Why are you trying to brainwash me?

REAL Pilot

Just don't let the merger happen between now and Christmas- my Dad was an Eastern Pilot and he probably won't pass bread with me after I work for Uninental.

PS Otto- how are the contract negotiations going

jkengberg

Shoot, if this random CAL guy says it's going to happen, it must be true. Maybe he'll give us some unsolicited financial advice too.