Continental Airlines Inc. and UAL Corp.’s United Airlines are expected to announce Monday that they’re merging to form the world’s largest airline by traffic, people familiar with the matter said.
The United board is meeting today, while Continental’s board is meeting today and Sunday to discuss the deal, these people said.
The sources cautioned that negotiations could fall apart at the last minute as they did in 2008, when Continental backed away. But after a hiccup over pricing the transaction, the talks appear on track, they said.
United is in a much different position than two years ago. Earlier this week, United reported that it narrowed its first-quarter loss to $82 million, compared with a loss of $382 million in the same quarter last year. Revenue rose by 15 percent, to $4.2 billion.
Those earnings led United to believe it had more leverage in the talks, which were at an impasse last weekend over the share-price ratio used in a stock-swap transaction.
United, as of last week, wanted the exchange terms to be based on where its stock closes the day before any agreement is signed. But that would lower the value for Continental shareholders, since UAL shares have climbed more than Continental’s.
Continental’s board met Wednesday to be briefed on the discussions. It was also asked to consider a range of prices in an effort to resolve the share-swap disagreement.
Continental already has agreed in theory to allow the combined airline to be based in Chicago, United’s home base, and to retain the United brand.
Denver International Airport is a secondary hub for United, which has nearly half of DIA’s market share and is the largest operator at DIA. Continental has 2 percent of DIA’s market share.
