Monday, May 3, 2010

United/Continental Merger Announced

As expected, Continental Airlines and United Airlines announced this morning that they will be merging into the world's largest air carrier, known simply as "United."  See Julie Johnsson, It's Official: United, Continental Announce Merger, Chi. Tribune, May 3, 2010 (available here).  From the story:

United Airlines and Continental Airlines announced early Monday morning that they are combining operations to form the world's largest airline in a $3 billion merger.

The deal is the culmination of a lengthy search by United CEO Glenn Tilton for a partner that would bolster his carrier's global network and that would promote consolidation in a badly fragmented industry plagued by chronic losses. Continental CEO Jeff Smisek will be named CEO of the new carrier, while Tilton will move to its board as non-executive chairman for a two-year term.

. . .

Unlike the earlier merger that United had contemplated with US Airways, this deal isn't expected to involve large-scale cuts since United's and Continental's networks have little overlap. The carriers expect to continue serving the 370 cities where United or Continental currently fly, and will operate 10 hubs, including bases in the four largest cities in the U.S.

As discussed on the blog last week, see here, the merger will likely test the Department of Justice's current antitrust enforcement policy.  Last month, the DOJ and Federal Trade Commission released their new Horizontal Merger Guidelines for public comment.  See FTC & DOJ, Horizontal Merger Guidelines For Public Comment: Released on April 20, 2010 (2010) (available here).  Perhaps the most startling feature of the new guidelines is the agencies' position that "merger analysis does not consist of uniform application of a single methodology" but rather a "fact-specific process" whereby a "range of analytical tools" are applied.  See id. at 1-2.  This turn by the agencies from methodological formalism to what might appear to be an ad hoc approach to merger analysis introduces a confounding element into what otherwise is being perceived as a structurally sensible deal for the airline industry.

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