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Originally published May 2, 2010 at 3:34 PM | Page modified May 2, 2010 at 9:50 PM

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United, Continental said to agree on stock-swap for merger

Merger of United and Continental would create the world's biggest airline; announcement expected Monday

Associated Press

MINNEAPOLIS — Directors at Continental and United airlines have approved a stock-swap deal that would combine them into the world's largest airline, a source with knowledge of the situation said on Sunday.

The deal values Continental at some $3.2 billion. The Sunday board actions were described by a person with knowledge of the votes, who declined to be identified because the companies plan an announcement on Monday.

The combined airline will be called United, based in United's hometown of Chicago, and run by Continental CEO Jeffery Smisek. United CEO Glenn Tilton will be chairman.

United, a unit of UAL Corp., is the nation's third-largest carrier by traffic. Continental Airlines Inc., in Houston, is the country's fourth biggest.

Any deal would need the approval of antitrust regulators. The Justice Department approved Delta Air Lines' purchase of Northwest in 2008, which turned Delta into the world's biggest carrier.

Combining Continental and United would leave the U.S. with three big international airlines — the new United, Delta, and American. US Airways also flies internationally, but its 2009 international traffic was less than one-third the size of American's.

One key issue in putting the two airlines together will be integrating the pilot workforce. A union hotline message to United pilots on Sunday said the "union remains engaged in this issue, and if a merger is announced by United and Continental," union officials "are fully prepared to protect and defend the interests of all United pilots."

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