United agrees to buy Continental Airlines

Associated Press

United and Continental Airlines are counting on more business travelers — not higher fares for vacationers — to make their $3 billion merger pay.

United CEO Glenn Tilton and Continental CEO Jeffery Smisek announced Monday that the nation’s third- and fourth-largest airlines will consolidate into the world’s biggest in hopes of drawing more business travelers who will pay top dollar for last-minute tickets. It’s a stock-swap deal in which United acquires Continental, and the new airline is to be called United.

The two airlines have been losing tons of money, first from high fuel prices, then the recession. Now they say their combined network of flights across the U.S. and around the world will attract enough corporate travelers to boost revenue by up to $900 million a year.

“The only people happier than Jeff and I today is our corporate sales team,” Tilton said.

Henry Harteveldt, a travel-industry analyst for Forrester Research, said U.S. leisure fares probably won’t change much because Continental and United routes overlap heavily with low-fare carriers such as Southwest. They compete with discount carriers on 92 percent of the 50 biggest routes they serve, Harteveldt said.

“The leisure market is always hotly contested,” so it’s less likely to tolerate fare increases, he said.

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