United, Continental officially merging
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Steve Chiotakis: United Airlines is buying Continental in a $3 billion deal. The combined company will take United’s name, but use Continental’s logo on the planes. The deal needs approval from shareholders
and antitrust regulators. Marketplace’s Brett Neely has more.
Brett Neely: The airlines’ strategy for selling this merger sounds like an old commercial:
Reese’s Ad: Two great tastes that taste great together, Reese’s Peanut Butter Cups.
But instead of chocolate and peanut butter, the airlines touted their irresistible combination of hubs and routes.
Here’s Continental’s CEO Jeff Smisek:
Jeff Smisek: We are taking the best of two leading airlines and combining them in an extraordinarily complementary way.
Continental and United say that together, the new carrier will have over a billion dollars in *synergies from cost cutting and extra revenue.
Allen Michel: Companies very often, when they do merge, they anticipate synergies.
Boston University professor Allen Michel studies airline mergers. He says most of the time, those anticipated numbers are way too optimistic.
Michel: Synergies don’t really get generated in mergers.
But after a decade of record losses and layoffs, the airline industry believes that getting larger is the only way to end its misery. And if this deal takes off, smaller airlines may also look for a sweet combination.
I’m Brett Neely for Marketplace.
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