Continental, United likely to merge next week

Continental Airlines and UAL Corporation's United Airlines are on Monday expected to announce they are merging to form the world's largest airline, according to people familiar with the matter.

They cautioned, however, that negotiations could still fall apart as they did in 2008, when Continental backed away, reported the Wall Street Journal. But after a hiccup over pricing, the talks appear on track, they said.

United is much stronger financially than it was in 2008. This week, United posted a narrower first-quarter loss of US$82 million, compared with a year-earlier loss of $382 million. Revenue rose by 15 percent, to $4.2 billion.

A weekend impasse over which share-price ratio should be used to calculate the deal's value resolved itself as UAL's share price declined. The market now expects a swap of 1.057 UAL shares for each Continental share. Those people expect the deal's terms to be similar, although terms are not yet set.

United had wanted the exchange terms to be based on the closing price of its stock on the day before any agreement is signed. But that would lower the value for Houston-based Continental shareholders, since UAL shares have climbed more than Continental's since United's interest in a merger was disclosed earlier this month. 

Source: Cargo News Asia