World’s Largest Air Carrier is Born

Shareholders of United Airlines parent UAL Corp. and Continental Airlines Inc. approved the merger of the two companies yesterday to form the world’s largest air carrier.More than 98 per cent of the votes cast by Continental’s shareholders approved UAL’s $3.17-billion US all-stock purchase of Continental at meeting in Houston.UAL investors also approved the deal by a 98-per-cent margin at a meeting in a Chicago suburb.

The carriers aim to complete the combination of their operations within the next 18 months and to realize $1 billion to $1.2 billion in annual revenue and cost benefits by 2013.

“We would have a company that would be an investable company, a leading company, and we’ve created what has every opportunity by almost every imaginable measure to be the best company in the industry,” UAL CEO Glenn Tilton said.

UAL and Continental announced their planned merger in May, two years after Continental spurned similar advances from United.

The merger, which won antitrust approval from the United States government in August and received clearance from the European Commission in July, is expected to close about Oct. 1.

The new carrier will be known as United Airlines and will be based in Chicago, with Continental chief executive officer Jeff Smisek as CEO. UAL’s Tilton will become non-executive chairman of the carrier.

“In approving the transaction, our stockholders recognized the value of bringing together Continental and United to create a platform for increased profitability and sustainable long-term value,” Smisek said in a statement.

The airline industry has grappled with a series of challenges in the last decade, including fears of terrorist attacks and the spread of disease, soaring fuel costs and an economic recession that squelched travel demand. Several carriers, including United, have restructured in bankruptcy.

The UAL/Continental deal is the first major U.S. airline merger since Delta Air Lines acquired Northwest Airlines in 2008. America West Airlines bought US Airways in 2005 to form the new US Airways Group.

“It’s an industry in enormous flux right now,” Tilton told reporters after the vote. “When you get into an industry undergoing tremendous change, being able to navigate the change from a position of strength as the new United will be able to, rather than a fragmented position, I think is enormously beneficial to our company.”

Tilton, a long-time proponent of airline consolidation, said carriers still need more cross-border partnerships.

Experts have cited over capacity as a reason for the industry’s plight. But in the wake of sweeping downsizing in 2008 and 2009, carriers are clawing their way back to stability.

“It just seems to me right now there is a reasonable balance between supply and demand in the business across all the business models,” Tilton told reporters.”Most industries learned it a lot faster than this one did.”