Local

Continental, United move closer to merger deal

Friday, April 30, 2010
Continental Airlines has been in talks with United Airlines about a possible merger

On Monday, Continental Airlines and United Airlines may be one. If the reported merger goes through, it will be the world's largest airline. However, not everyone thinks it will be a good deal, especially for Houston. In fact, some say Houston should be worried.

On a day when it's reported that Continental brass are meeting to talk merger, very few are talking about the implications. Houston Mayor Annise Parker is not speaking, the airport's not talking, and the president of the Greater Houston Partnership wasn't available.

But when the world's fifth-largest airline may look to pack up and carry its Houston headquarters non-stop to Chicago, it may just have almost everyone speechless.

"We have more reason to be alarmed here than they do in the Midwest," said Rice U. Management Professor Seethy Seetharaman.

Worried, he says, because Continental's marriage to United could mean it drops its maiden name and essentially disappears into the larger United.

"Clearly, United stands to gain more. So Continental would gain only if the condition of United gaining is first order satisfied. So Houston has enough reason to worry as well," said Seetharaman.

So why would Continental be interested? Remember a similar deal fell through at last minute two years ago, and combined, the new United would be the largest carrier in the world.

"It gives them more flexibility, not just to manage costs, but managing their schedules, their flights from one city to the other," Seetharaman said.

While the supposition is that Houston would keep most of the new airline's operational infrastructure, it's still not the kind of move about which anyone really wants to talk.

"I think it's a bad business decision. I think it's a huge loss for our region and I'm gonna join with Mayor Parker, GHP, Judge Emmett to advise to do everything we can to make that argument to keep them here," said Texas State Representative Kevin Brady.

One person briefed on the talks says the new airline would be based in Chicago.

That would have a major impact in Houston. Continental has 16,000 employees in this area, and more than 650 departures daily from Bush Intercontinental.

As merger talks continue, wire reports indicated the combined airlines would be based out of Chicago, where United headquarters is located, and the company would also stay under the United brand.

However, that is something local leaders are not ready to give up on.

"We really want the merged airline to come here," Harris County Judge Ed Emmett said. "We want this to be their main headquarters."

For Houston-area city leaders, that is one of the major questions surrounding the possible announcement of a merger between the two airlines. Just last week, local leaders held a press conference showing their support for Continental and the idea of keeping its headquarters here in Houston. They made it clear if and when a merger is announced, they are ready to release information about offsetting any potential moving costs from Chicago to Houston.

"Information related to updating their relationship with the city and county for a tax incentive, information from the state related to tax incentives," said Jeff Mosley, CEO of the Greater Houston Partnership.

However, Judge Emmett says if the headquarters are stationed in Chicago, he is not particularly concerned about job loss here in the Houston area. He says not only does Bush Intercontinental have room for growth, but it's cheaper to operate out of IAH than O'Hare International Airport.

Judge Emmett also said he is rather confident Bush Intercontinental will, at minimum, remain the operation hub.

"It can't move," Judge Emmett said. "I'm talking to you as a transportation person. There is no way to move the operations that are here to Chicago. O'Hare is a full airport."

We have also heard from an aviation expert out of Chicago. He says Continental's big hub here in Houston and the New York operation would complement what United already has.

There is not a lot of public talk, but we do know it will be a busy weekend. Reports say that Continental's board is meeting Friday and Sunday, while United's board is meeting Friday to discuss this merger. Continental will not confirm that information, nor will they confirm that both companies have agreed to a stock share price.

We do know there is a press conference scheduled for early next week in Chicago and Mayor Annise Parker's office has planned a press conference here in Houston on Monday morning.

Stay with ABC13 and abc13.com for the latest on this developing story. Eyewitness News reporter Kevin Quinn is in Chicago and will bring you the latest on any action by United and Continental on Friday and throughout the weekend.

(Copyright ©2014 KTRK-TV/DT. All Rights Reserved.)

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