Sunday, April 27, 2008

Continental-United merger plan scrapped

newspaper iconIt looks like the anticipated announcement of a merger between Continental Airlines and United Airlines is not going to happen. A press release issued today by Continental included the text of a "message to its more than 45,000 employees from Larry Kellner, Chairman and Chief Executive Officer, and Jeff Smisek, President." That message begins:
We want you to know that our Board of Directors met today and has unanimously supported management’s recommendation that, in the current industry environment, the best course for Continental is to not merge with another airline at this time.
The message goes on to explain that "the risks of a merger at this time outweigh the potential rewards, as compared to Continental's prospects on a standalone basis."

The message also hinted that Continental may leave the SkyTeam alliance, stating that "alternatives to SkyTeam" are being evaluated.

United Airlines has not yet released a public statement about the Continental announcement. United CEO Glen Tilton has been saying for years that the airline industry needs to be consolidated, and that airline mergers are inevitable. It remains to be seen whether United will now turn to a different merger partner. A number of news reports have mentioned that United was talking with US Airways as well as Continental.

Something tells me that today's announcement is not the end of the story.