Continental Airlines said Sunday it had abandoned merger talks with United Airlines and planned to remain independent, a blow to lengthy...
Continental Airlines said Sunday it had abandoned merger talks with United Airlines and planned to remain independent, a blow to lengthy efforts by United to find a merger partner.
The decision was a stunning development for United’s parent, UAL, which had been negotiating in expectation of reaching a deal by late this week.
With that deal scrapped, a new set of pairings is likely. UAL is expected to push to reach a deal with US Airways, with which it had also been discussing a merger, people involved in the talks said. UAL could not be reached for comment.
Meanwhile, Continental is expected to press ahead with preliminary talks to create a three-way alliance, short of a full merger, with American Airlines and British Airways.
Most Read Business Stories
- Boeing made an entire fake neighborhood to hide its bombers from potential WWII airstrikes
- Seattle artists worry potential sale of historic INS building could spell the end for their studios
- Frontier cancels flight, citing maskless passengers
- Fired after organizing, Starbucks baristas turned down a payout and took their bosses to court
- 6 Dr. Seuss books won't be published for racist images
Continental decided to exit talks after UAL announced worse-than-expected earnings last week, which sent shares falling. United said it lost $537 million during the first quarter, on sharply higher costs for jet fuel.
The airline, which spent more than three years under bankruptcy protection earlier this decade, said it would cut flights and eliminate a further 1,000 jobs.
The Continental board, which met Sunday, feared a merger with United could put their company in peril.
Continental, which had been expected to take management responsibilities in a deal with United, survived two bankruptcy filings of its own in the 1980s and 1990s and has been considered one of the industry’s best-run carriers.
In a letter to Continental employees, Chief Executive Lawrence W. Kellner and President Jeffery A. Smisek said they worried a deal with United would put the company’s operational and financial strengths “at risk.”
The two sides had agreed on several issues in their talks. Kellner would have run the combined company, while United CEO Glenn F. Tilton would have stepped away from day-to-day operations.
Tilton had advocated strongly for industry consolidation, saying it was the only solution to help the struggling airlines become consistently profitable.
US Airways CEO W. Douglas Parker has also pushed for consolidation, making an unsuccessful hostile bid last year for Delta before it emerged from bankruptcy protection.
Meanwhile, Continental’s next steps are far from clear. American, as the nation’s biggest airline until the planned Delta-Northwest merger is completed, is likely to want to dictate the terms under which the much smaller Continental comes on board.