Europe clears world's biggest airline merger
Tuesday 27 July 2010
Europe on Tuesday cleared a merger between US carriers United and Continental that will create the world's biggest airline, with the companies now racing to secure US approval.
The green light from Brussels competition enforcers has still to be matched by US anti-trust authorities, who turned down a United-US Airways deal in 2001, with backing also required from shareholders of the two companies.
Five weeks after being formally notified, the European Commission "concluded that the transaction would not significantly impede effective competition" in Europe, where the US airlines service a combined 35 destinations.
The new airline will fly under the United Airlines name and will hold around seven percent of global airline capacity.
It has a market value pegged at around 6.75 billion dollars (5.2 billion euros).
The companies hope to close the deal by the end of the year, and also on Tuesday announced their new line-up reporting to Jeff Smisek, Continental's current chief executive who will serve as CEO.
Four top executives were named from each side, with Continental finance chief Zane Rowe landing the key job of chief financial officer and United veteran Pete McDonald named chief operations officer.
"Approval from the European Commission is another important step toward completing our merger with United," said Smisek in a statement released by the two companies hailing the "unconditional" go-ahead.
"We continue to work cooperatively with the US Department of Justice toward an expeditious completion of our merger," added Glenn Tilton, UAL Corporation chairman.
The new airline will serve more than 144 million passengers per year with 370 destinations in 59 countries.
The two boards are hoping to generate combined annual savings and new revenues of up to 1.2 billion dollars by 2013.
"United and Continental's networks are complementary as they have hubs in different US cities," a statement from the commission said of their passenger transport interests.
"The proposed merger therefore only leads to small, incremental increases in the market shares of the parties," with only a "limited impact" on the air cargo transport sector.
United and Continental both had a turnover of more than three billion dollars in 2009 but each reported losses.
Struggling with fallout from the worst recession in a generation, terrorism and costs brought on by an Icelandic volcano that forced the suspension of thousands of flights, airlines have been queuing up to join forces.
The deal follows Delta's 2008 takeover of Northwest and a British Airways tie-up with with Spanish carrier Iberia to avoid being sidelined by European rivals Air France-KLM and Lufthansa.
The merged giant will maintain United's base in Chicago as its headquarters.
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