Will United Do a Deal With US Airways or Continental?

Hint, don’t think it has anything to do with whichever makes a better match (which is clearly Continental).

Holly Hegeman nails it.

[A]n eventual deal will depend heavily on the role current members of upper management at United Airlines take in any deal. Particularly United Airlines Chairman and CEO Glenn Tilton. As I wrote this week in PlaneBusiness Banter, one of the big factors in the failure of the Continental deal, and a complicating factor in a proposed US Airways’ deal was Tilton’s insistence upon keeping control in both deals.

But at the same time, Tilton knows that both US Airways and Continental would like to link up with United. And pressure is building on Tilton to get a deal done. He’s only been talking about doing one since he took his position with the airline in 2002.

Frankly, I think Continental would be better off to sit and wait out the current matchmaking attempts. Unless Continental CEO Jeff Smisek and his management team can take control of the new merged entity…

With US Airways, sources who are involved with the deal tell us that CEO Doug Parker appears willing to let Glenn Tilton stay on in the role of Chairman, with Parker taking the CEO position. But would Tilton be willing to give Parker the control he would need to put together a new management team?

One thing is for sure. This deal, when all is said and done, will be all about ego. Forget routes, forget aircraft compatibility. Forget which deal the markets finds more appealing.

Separately, there’s even been some talk of a 5% stake in a merged entity for management, as a payoff to get things done.

When ultimately there’s little question that a Continental – United merger at least makes a little sense (wtih Cleveland going away, and Dulles downsizing, but with myriad fleet commonality issues and workforce cultures that likely aren’t worth the potential upside). Whereas United and US Airways seems just silly — Philadephia, Dulles, National, and Charlotte hub operations? (Ok, National isn’t technically a US Airways hub but it might as well be.) All three categories already have alliance partnerships, United and Continental obtained antitrust immunity, and any can park their planes wherever they wish without going through the merger.

Instead as Holly observes it’s about egos. And payoffs/payouts.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. If a Continental merger makes better business sense, one would hope the market would reward that choice with a higher combined stock price and thus higher executive pay.

    WWARHDMS? (What would a Robin Hanson Decision Market Say?)

  2. CO beats US. My preference.

    Since I have USAir miles, I’d prefer UA/US, to build up my account.

Leave a Reply

Your email address will not be published. Required fields are marked *