Citing the reaction to the successful Northwest/Delta merger, United Chair & CEO Glenn Tilton said he’s interested in renewing merger talks with Continental. Sending what can only be described as a Valentine’s signal to the Houston-based carrier, the suitor noted its wish to remain independent, but was clearly leaving the next move up to Continental.
Given the fact that Continental is well advanced and extremely successful in both its fiscal and customer service management, it may be reticent to link beyond their current Star partnership with an airline that had one of the worst reputations in the industry.
Tilton and his senior staff spoke during their 4Q2009 analyst call of structural changes in the industry and, at one time or another, all US airline CEOs have touted the benefits of more consolidation. However, given the growth of international alliances, many wonder why anyone would bother with the problems associated with mergers when interconnection benefits can be had through other means.
Chief among problems cited is the integration of seniority rolls, something that has yet to be worked out at either US Airways and Delta in their respective mergers with America West and Northwest.
You bet Wall Street likes mergers
In the last few months, airline analysts have peppered executives with merger questions, but little else has been said except that Continental CEO said during his year-end financial call he was glad to have remained independent while at the same time transferring to the Star Alliance, joining United.
Mergers are guaranteed to raise stock prices and make investors millions if they time it right. The Financial Times said Tilton expects another big airline merger within the next two years, but few would disagree with him given the success of Delta/Northwest and the hopes of Wall Street. However, he has also been extremely vocal on reducing government regulations, and, in his role as Chair of the Air Transport Association, has called for reform to allow airlines to be treated like other industries when it comes to cross-border ownership.
While it is unlikely that open skies with Europe, now in round two negotiations, would bring a relaxation in cross-border ownership, it is something airline CEOs see as a must if they are to achieve the restructuring of the US airline industry into actual profitable enterprises. Such a move would have to gain the ascent of Congress, which has resisted such liberalisation.