Continental Airlines brought its merger talks with United Airlines to an abrupt end on Sunday amid concerns for the rival US carrier’s financial strength in the face of record fuel costs and waning demand for air travel.United and Continental have held preliminary discussions for more than a year, and the pace of the negotiations quickened this month with Delta Air Lines’ agreement to merge with Northwest Airlines…..
“The best course for Continental is to not merge with another airline at this time,” Larry Kellner, chief executive, and Jeff Smisek, president, said in a message to employees. “The board very carefully considered all the risks and benefits of a merger with another airline, and determined that the risks of a merger at this time outweigh the potential rewards.”
(full article here)
Ouch, this has to be really embarrassing for Chairman Tilton & Co! On one hand I’m happy this isn’t happening since I always thought the two carriers weren’t compatible, but what does this really mean for us? I think it’s safe to say that the state United is currently in (and for that matter most US airlines) isn’t viable in the long run, so something’s gotta give. Maybe United will be downsized substantially? Maybe they’ll find another carrier to merge with?
I’ve said it a bajillion times before, so let me say it one more time. Right now the three legacies that are looking for partners are AA, UA, and US. Forget about US, they bring very little to the table for AA or UA. At the same time both AA and UA are in really bad situations at the moment. There’s a good chance AA will need to file for Chapter 11 by the end of the year in their current path, and probably almost the same for UA.
I’ve always said CO and UA are great airlines, but not together. AA and UA, on the other hand, while both good carriers, are both on a one way road to some Chapter you don’t wanna be in. Together, however, I think they could be quite successful. So how can we make this work and keep the government happy? How about dumping all of AA’s MD80’s (basically half their fleet), eliminating the overlap at ORD, LAX, and JFK, and that alone will basically cover the decrease in fleet size. Other than that they’re quite compatible: similar FFP’s, both have three cabin aircraft (at least some for AA), fleets are somewhat similar, and their route networks complement each other nicely (UA in Asia and Australia and AA in India, South America, and to a certain extent Europe). The only issue would be the unions since we’d see massive layoffs, but at the same time that’s better than liquidation for either of those carriers, right?
Pickings are getting slim, and this is what I think it’s coming down to.