16-Jun-2010 11:06 AM

Continental expecting USD1.0bn-1.2bn in synergies from United merger

Continental Airlines expects (15-Jun-2010) USD1.0-1.2 billion p/a in synergies from its proposed merger with United Airlines, including revenue synergies of USD0.8-0.9 billion and net cost synergies of USD0.2-0.3 billion. 75% of synergies are expected to be achieved in the second year, with full run-rate expected to be achieved in year three. The carrier also expects the combined network will add more than 2 million passengers p/a. The carriers plan to respond to a request for more information from the Department of Justice in early Jul-2010 (Dow Jones, 15-Jun-2010). CEO, Jeff Smisek, reiterated that he sees no competition issues with the merger, while United CFO, Kathryn Mikells, stated the absence of joint labour contracts would not be a barrier to a successful merger. The carriers’ pilots are expected to have a contract by year-end (The Houston Chronicle, 15-Jun-2010). [more]

Mr Smisek, meanwhile, stated that a recovery is demand “is on” and the carrier is benefiting from an increase in corporate traffic and a higher average fare per mile. CFO, Zane Rowe, stated mainline capacity is expected to increase 0.5-1.5% this year, while capacity on regional partners will be flat (Associated Press, 15-Jun-2010).