Who Bought Continental Airlines? The Saga of a Storied Brand

United Airlines, through its parent company UAL Corporation, acquired Continental Airlines in 2010 in a merger of equals. This wasn’t a hostile takeover but a strategic partnership aimed at creating the world’s largest airline at the time. The Continental brand was retired, and the combined airline adopted the United Airlines name, operating under a single operating certificate.

The End of an Era: Understanding the United-Continental Merger

Continental Airlines, a name synonymous with aviation excellence and innovation, ceased to exist as an independent entity after the 2010 merger with United Airlines. This wasn’t a simple acquisition; it was structured as a merger, theoretically putting both airlines on equal footing. However, the practical outcome saw the United brand survive, effectively absorbing Continental’s operations and identity. The reasons behind this monumental shift are complex and worth exploring.

Strategic Rationale Behind the Merger

The airline industry is notoriously volatile, plagued by fluctuating fuel prices, intense competition, and cyclical economic downturns. In this landscape, economies of scale become paramount. The United-Continental merger was driven primarily by the desire to reduce costs, increase efficiency, and expand network reach.

• Cost Savings: By combining operations, the merged airline could eliminate redundant staff, consolidate facilities, and negotiate better deals with suppliers.
• Network Expansion: The merger created a vastly larger route network, offering passengers more destinations and connecting flights. This enhanced competitiveness against other major airlines.
• Revenue Synergies: A larger network and increased market share allowed the merged airline to capture more revenue from both business and leisure travelers.

Key Players and Deal Structure

The key players in this merger were Jeff Smisek, then CEO of Continental Airlines, and Glenn Tilton, then CEO of United Airlines. Smisek ultimately became the CEO of the newly formed United Continental Holdings, signaling a perceived balance of power, even if the brand ultimately favored United. The deal was structured as a stock swap, with United’s parent company, UAL Corporation, acquiring Continental in exchange for shares. This essentially gave Continental shareholders a stake in the merged entity.

The Integration Process: Challenges and Triumphs

Integrating two large and complex organizations like United and Continental was no easy feat. The process was fraught with challenges, including:

• Unifying IT systems: Integrating disparate reservation systems, loyalty programs, and operational platforms proved to be a massive undertaking.
• Blending corporate cultures: Combining the distinct cultures of United and Continental required careful management to avoid conflicts and maintain employee morale.
• Negotiating labor agreements: Reaching agreements with various labor unions representing pilots, flight attendants, and ground staff was crucial for smooth operations.

While the integration process had its share of hiccups, the combined airline eventually streamlined operations and achieved many of its initial goals. Today, United Airlines stands as one of the world’s leading airlines, a direct result of the strategic vision behind the Continental merger.

Frequently Asked Questions (FAQs) about Continental Airlines and the Merger

Here are 12 frequently asked questions to provide further insights into the acquisition and the legacy of Continental Airlines.

1. Why was Continental Airlines a desirable acquisition target?

Continental possessed several attractive qualities: a strong international network, particularly to Asia and Latin America; a modern fleet of aircraft; and a reputation for customer service (prior to the merger). These assets made Continental a valuable partner for United, which sought to bolster its international presence and modernize its fleet.

2. What happened to the Continental Airlines frequent flyer program, OnePass?

The OnePass program was merged into United MileagePlus. OnePass members were given equivalent status and miles in MileagePlus. While there were initial frustrations for some members during the transition, the combined program offered a wider range of benefits and redemption options.

3. Did the merger result in any route changes or cancellations?

Yes, some route changes and cancellations occurred as the merged airline optimized its network. Certain overlapping routes were eliminated to improve efficiency, while new routes were introduced to leverage the combined network’s strengths.

4. How did the merger affect employees of both United and Continental?

The merger led to some job losses due to redundancies in management and administrative functions. However, the combined airline also created new opportunities in certain areas. Labor unions negotiated agreements to protect their members’ interests as much as possible.

5. What were the long-term consequences of the merger for the airline industry?

The United-Continental merger contributed to further consolidation in the airline industry, leading to fewer major players and increased pricing power for the remaining airlines. It also set a precedent for other mergers and acquisitions.

6. Was there any government regulatory oversight of the merger?

Yes, the U.S. Department of Justice (DOJ) reviewed the proposed merger to ensure it did not violate antitrust laws. The DOJ ultimately approved the merger with some conditions, such as divesting some airport slots to maintain competition.

7. How did the merger affect the flying experience for passengers?

Initially, there were reports of inconsistent service and operational challenges as the two airlines integrated. However, over time, the merged airline standardized its procedures and improved the passenger experience, focusing on in-flight amenities, on-time performance, and customer service.

8. What role did the financial crisis of 2008 play in the merger discussions?

The financial crisis of 2008 put significant pressure on the airline industry, accelerating the need for consolidation. Both United and Continental faced financial challenges, and the merger offered a way to strengthen their balance sheets and weather the economic storm.

9. Why was the United Airlines name chosen over the Continental Airlines name after the merger?

While the merger was presented as a “merger of equals”, United’s name recognition and established global brand likely played a significant role in the decision. United also had a more extensive international network prior to the merger, particularly to Europe.

10. How did Continental’s “Go Forward” plan implemented by Gordon Bethune contribute to its value prior to the merger?

Gordon Bethune’s “Go Forward” plan in the 1990s revitalized Continental Airlines, transforming it from a struggling carrier to a profitable and well-regarded airline. This plan focused on improving employee morale, enhancing customer service, and streamlining operations, making Continental an attractive merger partner.

11. Did any other airlines attempt to acquire Continental before United?

There were rumors and speculation about other potential suitors for Continental over the years, but ultimately, United was the only airline to successfully negotiate and complete a merger agreement.

12. What is the legacy of Continental Airlines today?

Even though the Continental Airlines brand no longer exists, its legacy lives on through the employees who joined United, the routes that became part of the United network, and the innovations that Continental pioneered. The spirit of Continental, known for its employee-focused culture and customer service, continues to influence United Airlines to this day. While the red globe is gone, its impact on the modern airline industry remains significant.