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Continental-United merger talk renewed by CEO shakeup?

Continental-United merger talk renewed by CEO shakeup?

Last week's news that Continental CEO Larry Kellner would resign at the end of the year

» Career | Tuesday, July 21, 2009 • Air News Times

Last week's news that Continental CEO Larry Kellner would resign at the end of the year "has spurred debate that the carrier could resume consolidation talks with new partner United Airlines," Reuters writes. Jeff Smisek, currently Continental's COO, will take over as CEO spot next year. Reuters says that has "sparked speculation over whether Continental would merge under the new leadership of Smisek, with Kellner facilitating a deal from outside the corner office."

"We may see the stage a little more set for a merger," Stuart Klaskin of KKC Aviation Consulting tells Reuters. Still, Klaskin adds "I continue to think it's unlikely." As you might recall, there's recent history between Continental and United. The two had been in talks about a possible merger, but – apparently worried about United's financial strength – Continental ended the talks in April 2008. Instead, the airlines agreed to a deep alliance in which Continental would shift from its current SkyTeam frequent-flier group to the Star Alliance, which includes United.

Kellner's decision to squash the merger is being considered by many to be one of his most important moves as Continental's top executive. Business Week's Justin Bachman notes "United would have given Continental an enormous network boost, with access in Asia and the western U.S. But the cautious Kellner passed. The culture clash would not have been minor." Aviation industry consultant Darryl Jenkins echoes that sentiment to The Associated Press, saying Kellner "made the right call. Continental's product is much better, and it would have been very difficult to integrate the two products."

As for the possibility of renewed Continental-United merger speculation, most industry observers seem think that the airlines will not transform their current alliance plans into another attempt at a full-fledged merger. Brett Snyder, author of The Cranky Flier aviation blog, writes on BNET.com that Continental's "succession plan has been in place for sometime, and I imagine there won’t be any major changes in direction."

Others say they would not rule out a possible merger down the road. Hunter Keay, an analyst with Stifel Nicolaus, notes that with their new alliance, Continental and United are "essentially merging their networks over the next six months. I would say it certainly puts them closer to a potential M&A (merger and acquisition) situation." Still, even Keay says and merger of the two would likely be years away.

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