Continental and United sign merger

CONTINENTAL Airlines and United Airlines have signed a $3.15bn (£2bn) merger agreement that is expected to create the world’s largest airline.

The two US carriers signed the all-stock merger agreement yesterday, with expectations that they will officially consolidate both companies by the end of the fourth quarter this year.

Under the agreement, United shareholders will own 55 per cent of the new holding company, United Continental Holdings, while Continental shareholders will own 45 per cent of the company.

“This combination brings together the best of both organisations and cultures to create a world-class airline with tremendous and enduring strengths. Together, we will have the financial strength necessary to make critical investments to continue to improve our products and services and to achieve and sustain profitability,” said Jeff Smisek, Continental’s chairman, president and chief executive officer.

United Continental is expected to generate $29bn in annual revenue, with expected incremental revenue of between $800m and $900m a year, which it expects to derive from expanded passenger options and additional international services.

Smisek will take the helm of the new group, while United chairman, president and chief executive officer Glenn Tilton will serve as a non-executive chairman until December 2012.

The new company will operate under the United name, but will adopt Continental’s logo, livery and colors.

News of the deal sparked a rise in airline stocks yesterday as the market anticipated further consolidation amongst commercial carriers.