"Continental will propose; United will accept; a marriage made in the heavens."
-- Motley Fool CAPS player Stuckonsocks
That call looks almost prescient today, thanks to a report from Crain's Chicago Business that United Airlines parent UAL
Would a deal with either airline make sense? Recent history says yes. Consider the acquisition of U.S. Airways
United could benefit similarly, though Continental strikes me as the better partner. Why? Well, for one, the fleets. Continental and United both heavily rely on Boeing
Second, Delta's hub in Salt Lake City is regionally indistinct with United's hub in Denver. And both airlines already have significant operations at New York's JFK airport. Meanwhile, Continental's hubs in Cleveland, Ohio, Newark, N.J., and Houston, Texas, would offer United a manageable expansion of its route structure.
But a merger with Continental would hardly be easy. Unions on both sides, rightfully paranoid after years of layoffs, would battle over work rules and seniority lists, among other issues. What's more, Continental still pays a pension to employees. United doesn't. How would that incongruity get reconciled in a merger?
Nevertheless, I find the combination compelling. United would be able to expand both its domestic and international operations without investing heavily in new infrastructure. That, in turn, would stabilize margins, adding some water to a dry moat that's offered little protection from the likes of Frontier
Good call, Stuckonsocks. Let's hope someone at United is listening.
Prepare for take-off with related Foolishness:
- Has United been naughty?
- I still haven't bought United.
- But the carrier is still among the top five in terms of quality.
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Fool contributor Tim Beyers has 33 picks in his Motley Fool CAPS portfolio, including UAL, which he believes will outperform the S&P 500. He doesn't, however, have real money in the airline or in the stocks of any of the other firms mentioned in this article. What's your take on United? Continental? Get in the game and let us know.