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    Continental Airlines

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    Manjunath Shetty
    This merger between United Airlines and Continental Airlines created one of the world's largest carriers, United Continental Holdings. However, three years after the merger, it is still causing problems integrating the two companies' systems. United was recently fined $350,000 for delays in processing over 9,000 refund requests, which it blamed on issues merging the two airlines' reservation systems. Critics say the problems should have been resolved by now, over three years later, and question whether United has devoted enough resources to properly integrating the merged companies. Other integration problems remain, such as inefficient labor contracts separating former United and Continental crews.

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    Continental Airlines

    Uploaded by

    Manjunath Shetty
    298 views6 pages
    This merger between United Airlines and Continental Airlines created one of the world's largest carriers, United Continental Holdings. However, three years after the merger, it is still causing problems integrating the two companies' systems. United was recently fined $350,000 for delays in processing over 9,000 refund requests, which it blamed on issues merging the two airlines' reservation systems. Critics say the problems should have been resolved by now, over three years later, and question whether United has devoted enough resources to properly integrating the merged companies. Other integration problems remain, such as inefficient labor contracts separating former United and Continental crews.

    Original Description:

    Case Study: United Airlines and Continental Airlines Love Affair

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    This merger between United Airlines and Continental Airlines created one of the world's largest carriers, United Continental Holdings. However, three years after the merger, it is still causing problems integrating the two companies' systems. United was recently fined $350,000 for delays in processing over 9,000 refund requests, which it blamed on issues merging the two airlines' reservation systems. Critics say the problems should have been resolved by now, over three years later, and question whether United has devoted enough resources to properly integrating the merged companies. Other integration problems remain, such as inefficient labor contracts separating former United and Continental crews.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    298 views6 pages

    Continental Airlines

    Uploaded by

    Manjunath Shetty
    This merger between United Airlines and Continental Airlines created one of the world's largest carriers, United Continental Holdings. However, three years after the merger, it is still causing problems integrating the two companies' systems. United was recently fined $350,000 for delays in processing over 9,000 refund requests, which it blamed on issues merging the two airlines' reservation systems. Critics say the problems should have been resolved by now, over three years later, and question whether United has devoted enough resources to properly integrating the merged companies. Other integration problems remain, such as inefficient labor contracts separating former United and Continental crews.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6
    At a glance
    Powered by AI
    The key takeaways are that United Airlines and Continental Airlines merged to form United Continental Holdings in order to generate savings, increase revenue and market share, and cover losses from the recession. However, three years later integration issues were still causing problems.

    The major rationale was the formation of a new company and expected savings of over $1 billion from synergies. Both airlines had incurred losses during the recession.

    Expected benefits included increased revenue, market share, fleet size and destinations by combining the airlines. The merger helped cover losses from both companies.

    Introduction Vidya

    Q1. Rationale Vignesh


    Q2. Type of Merger Shobitha
    Q3. SWOT analysis of Target Company and Acquiring
    Company Vidur
    Q4. And SWOT analysis on Merger Company Shawn
    Conclusion - Manjunath

    ****Material for presentation is in the upcoming


    pages. Prepare other than the Material Given . And the
    points in the material might not be present in the
    PPTs. Better to Memorize.

    Chosen M&A - United Continental Inc.


    Chosen Acquiring Company - United Airlines (UAL)

    Target Company - Continental Airlines


    Group Number Presentation-1
    1. What was the rationale for the M&A you have chosen?
    The major rationale for this M&A was the formation of a new company. Both the airlines
    have taken losses in the recession and expect the merge to generate savings of more than
    $1 billion. This merger is concerned with the aviation industry which is a good industry
    to study about. This is the main reason why we have chosen United Continental Holdings
    Inc as the M&A. Presently they have 1042 fleets. Their combined revenue is $29 billion.
    Given the high revenue, it brought us more interest to study about this M&A.
    2. Type of merger? Relate the benefits accrued in the earlier point in the light of the type of
    merger and the benefits expounded in the literature
    The merger between United Airlines and Continental Airlines is a concentric merger.
    Following are the benefits achieved by United Continental Holdings Inc:
    Organization

    United Airlines

    Continental Airlines

    United Continental
    Holdings

    Revenue (FY 09-10)

    $16.335 billion
    (Annual Report
    2009)

    $12.586 billion
    (Annual Report
    2009)

    $23.229 billion
    (Annual Report
    2010)

    Operating Income

    $(161) million FY
    2009, $(4438)
    million FY 2008

    $(146) million FY
    2009, $(314) million
    FY 2008

    $976 million

    Passengers (in
    millions)

    55083

    45573

    100656

    Presence

    Pacific, Europe,
    Latin America

    Europe, Asia,
    Canada, Mexico,
    Latin America

    Flights in a day

    3300`

    3000`

    Africa, Europe,
    Latin America,
    Asia, Canada and
    Mexico
    5700

    Presentation-2

    3. SWOT for: a) Acquiring Company b) Target Company c) Merged Company. Do this


    threats and weaknesses of the acquiring company and the target company get reduced
    through the M&A? Or is there any reduction in strength/ opportunity availability on
    account of the M&A?
    SWOT Analysis:
    Acquiring Company
    Strengths
    Destinations where United Airlines was flying was comparatively much higher
    Fleet Operation was high at 696
    Large number of employees worked in United Airlines
    Tech, Asset Leverage, Customer Loyalty, Supply chain, Size Advantage
    Weakness
    Losses were being incurred before the merger
    Higher Debt burden
    Tarnished Reputation
    Bad acquisition
    Opportunities
    Merge with different airlines to get the maximum market share
    They operate on high end technology which gives scope for further sophistication
    Online Market, Innovation and international market
    Threats
    Competitors can eliminate United Airlines from the race at any time
    Bad Economy
    Volatile cost
    Change in tastes
    International Completion

    Target Company
    Strengths
    Brand Image of Continental Airlines was very strong in addition to the recognized
    logo
    Strong Management

    Weakness
    Lesser Fleet Size in comparison of United Airlines
    High Staff turnover
    High cost structure
    Flawed industrial structure for airlines
    Opportunities
    International expansion
    Threats
    Political risks
    Government regulation
    Volatile energy prices
    Fuel costs

    Merged Company
    Strengths
    Market share of United Continental Holdings helped United Airlines to rank 2nd
    largest airlines with a domestic market share of 15.9% and international share of
    12%
    Combined there were higher number of fleet, destinations and passengers
    Weaknesses

    Initially losses were incurred by United Airlines amounting to $1.1 billion in


    2009. On the other hand Continental faced losses up to $282 million

    Opportunities

    Combined revenue generation scope is higher


    Combined fleet strength and destinations are more
    Capturing a higher market share in the aviation industry
    The company has to optimize the gauge and frequency of its fleet in order to meet
    travel demand and capitalize on its combined global network efficiency
    Largest aircraft size

    Threats

    Competitors merging with each can out shadow this merger (For Example: Delta
    Airlines which is a domestic competitor for United Airlines if merged with Air
    France- KLM or any other airlines, the synergy cold cause a total operation
    efficiency more than United Airlines)
    Fare rates of the flights can bring a negative impact among passengers

    4. What benefits were expected to be accrued to the acquiring and the target companies?
    Were they actually realized? Was the M&A hostile or friendly? Provide sound reasons. If
    hostile, were any defensive measures adopted? Explain how such measures were
    overcome.
    Through this merger, the main advantage that was expected was to cover up all the losses
    being incurred by both the companies. They were also looking to improve the fleet size,
    destinations.
    By merging with each other, the United Continental Holdings was formed. Both the
    acquiring and acquired company was able to benefit from this merger. Major benefit was
    seen in the rise of revenue of the company. Since both the firms were under losses, a
    merger was needed to revive these companies. If not the case would be similar to

    Kingfisher Airlines. As the need for the moment, this was a friendly merger without any
    force. Both the companies were benefitted from this merger.

    Conclusion
    Almost three years have passed since United Airlines and Continental Airlines merged to create
    one of the world's largest carriers. The combined entity, which took United's name, has the
    biggest fleet of commercial airliners on the planet and flies to more destinations than any
    competitor. But three years in, the merger is still causing problems. Late last month, for example,
    America's Department of Transportation fined United $350,000 for taking too long to process its
    customers' refund requests. (The airline also got in trouble for reporting some of its overbooking,
    baggage, and pet-related statistics incorrectly, but was not fined for those violations.) Here's the
    remarkable thing about this latest fine, which was connected to delays of some 9,000 refund
    requests: United blamed it on the merger. According to the Los Angeles Times, United told the
    regulators that when the two legacy airlines' reservation systems were merged it resulted (in the
    words of a DOT report) "in some unforeseeable anomalies that caused a temporary inability to
    process refunds in a timely manner."
    That's unacceptable. Again, it's been nearly three years since the merger. "Unforeseeable
    anomalies" should have been corrected by now. And on what sort of scale is it appropriate to
    describe a three-year-old problem as "temporary?" This isn't the first time United has run into
    computer trouble: it has had repeated technology problems since the merger. Its technology team
    has had more than enough time to sort things out and get them working smoothly. So are there
    not enough resources devoted to tackling these sorts of problems? Or is there a management
    issue? United needs to figure it out. Because, as the Denver Post reports, there are a lot of other
    problems still plaguing this sewn-together giant. It has horribly inefficient labour contracts that
    require formerly united crews to fly on united aircraft and formerly Continental crews to fly on
    Continental aircraft. Jeff Smisek, the CEO, recently gave his company a vote of confidence by
    buying $250,000 of stock in it.

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