Blackbird

United remains keen on consolidation

By Pilita Clark in London
Published: February 15 2010 20:53 | Last updated: February 16 2010 00:28


The head of United Airlines has hinted at the benefits of renewing merger talks with Continental Airlines, saying the market had judged in favour of rival Delta’s takeover of Northwest.
“The market capitalisation of Delta is approximately twice the combined market capitalisation of United and Continental,” said Glenn Tilton, chairman and chief executive of Chicago-based United.
“The investor seems to have spoken. The market seems to have suggested that scope and scale in a global business are important,” he told the Financial Times.
However, Mr Tilton, a prominent advocate of airline consolidation, played down the prospect of an imminent renewal of merger talks between United and Continental, which ended in 2008 amid soaring fuel costs and fading cash reserves.
Jeff Smisek, president of Continental, has since said that he was “very pleased” to remain independent but would review that position if Delta’s takeover of Northwest resulted in higher earnings and tougher competition.
“I think my counterpart [at Continental] has spoken and I think he’s been pretty clear,” Mr Tilton said. “So I accept that as their position and we’re taking full advantage of our partner relationship.”
Merger talks between United and Continental ended in April 2008. Continental then left the SkyTeam alliance headed by Delta and Air France, and joined United in the rival Star Alliance.
Delta merged with Northwest later in 2008, creating a group with a market capitalisation of $9.5bn, compared with a combined market value of just under $5.5bn for United and Continental.
Mr Tilton said he believed there would be another big airline merger within the next two years but declined to be more specific.
Mr Tilton, who spent more than two decades with the Texaco oil group before joining United in 2002, has been an outspoken critic of the web of international legal barriers to global airline consolidation.
He has stepped up his campaign in recent speeches, including one to the Aviation Club in London last week in which he said the airline industry had been marked by “our systemic failure to earn our cost of capital and achieve any level of consistent financial resilience”.
Comparing consolidation in other industries, he said: “Italy’s Fiat owns Chrysler. India’s Tata Motors owns Jaguar. Lenovo, a Chinese company, owns IBM’s PC business. Each is the product of mergers; each is the beneficiary of cross-border capital flows, and each demonstrates a corporate commitment to expand the reach of its business.
“Yet similar cross-border ownership is not permitted in the airline business. The bilateral system prevents cross-border consolidation, keeping the industry financially handicapped.”


This guy wants a company like Air Mexico to be able and buy United and doesn't see anything wrong with that. Please get this guy out of the airlines.

iaflyer

He can't get any US company, airline or otherwise, to buy United, so he's trolling around the rest of the world and complaining about the rules.

JetPiedmont

I wouldn't expect the same reaction from Wall Street to a UAL merger (with anyone) that DAL got, but I do believe that Tilton thinks if he talks it up enough he will "make it happen".

SOTeric

All ya'll sound a little nervous that a UA/CAL merger may just cause some trouble for ya.

tortue

Perhaps Mr. Tilton should focus on the fact that the majority of his customer-facing portion of the company is outsourced to India.

Reservations, baggage service call centers and email all goes to people who have a fairly constrained vocabulary.

iaflyer

No, not at all. I think a CEO should focus on running a company and making it good - not trying to shop it around to anyone who will listen. If he really wants to sell UAL to someone, do it by making it an powerful company - not by outsourcing more and more of the company.

CVG767A

I think consolidation would help all airlines--Delta included. This country has too many airlines, and too many hubs, for any of them to make a reasonable profit.

johnso29

Nope. I'm all for it. The less choices the pax of this industry have when they jump on those stupid cheap ticket sites, the better. I think it'll be quite healthy for the industry & pilots.

contrail67

It will cause them'al ALOT of trouble.....and they are right...no one will be buying United...United will be buying them.

mwa1

tilton said coming out of bk that ual could not survive but needed someone to buy them. he never intended to run ual as an independent standalone brand. he is simply trying to make hundreds of millions like the other ceo's did upon merging. it won't hurt ya to take another one for the team will it?