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Continental & United Merger


citykid09

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There has to be something the State and the city could do to keep the headquarters in Houston. Its going to be a major loss not only to Houston but to the state. IAH will be hurt as well even if it remains a hub. All of the upgrades Continental was helping pay for for the airport. It sucks! Chicago always thinks its entitled to get the better of any deal. Lets hope the state of Texas and the city of Houston can burst their bubble!

FAT CHANCE.

This is Texas afterall. We don't regulate anything. Houston's businesses are here because they want to be here. The city, nor the state is so busy making this place a "business orgy"... no taxes, no restrictions no NOTHING that when something like this happens we may as well bend over and be sore in the morning. This is Texas's and Houston's fault because we're not giving them any reasons to stay here.

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FAT CHANCE.

This is Texas afterall. We don't regulate anything. Houston's businesses are here because they want to be here. The city, nor the state is so busy making this place a "business orgy"... no taxes, no restrictions no NOTHING that when something like this happens we may as well bend over and be sore in the morning. This is Texas's and Houston's fault because we're not giving them any reasons to stay here.

That's not true at all, really. Corporate welfare is popular in Texas and has become something of a cottage industry. We have 4A/4B sales taxes supporting economic development and the Texas Enterprise Fund. And you'd better believe that folks from the Governor's economic development office are in a bidding war with Chicago right now, whether it gets publicized or not.

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FAT CHANCE.

This is Texas afterall. We don't regulate anything. Houston's businesses are here because they want to be here. The city, nor the state is so busy making this place a "business orgy"... no taxes, no restrictions no NOTHING that when something like this happens we may as well bend over and be sore in the morning. This is Texas's and Houston's fault because we're not giving them any reasons to stay here.

:wacko: this has got to be one of the better crazy contradictoy posts. So, 'we're' so busy being a regulation hating, pro-business city we can't attract and keep businesses.....or are you saying we should not be business friendly in order to entice make private enterprise to hang around?

?? Rather than the petulant whining about how it's not fair, where is the discussion about the broader implication--

that increasingly, the only viable American business model is Too Big Too Fail. It's the new monopoly: just 2 or 3 giants (media, autos, airlines, banks, agribusiness, etc) because the small players cannot survive against the bohemoths, and the bohemoths can only survive with constant government handouts.

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...where is the discussion about the broader implication--

that increasingly, the only viable American business model is Too Big Too Fail. It's the new monopoly: just 2 or 3 giants (media, autos, airlines, banks, agribusiness, etc) because the small players cannot survive against the bohemoths, and the bohemoths can only survive with constant government handouts.

Larger companies enjoy a lower Weighted Average Cost of Capital (WACC) because they tend to have less exposure to risk than do their smaller brethren. And between the economies of scale that they can generate and their attractiveness to young professionals whose eyes glaze over at the mere thought of associating themselves with a national brand...yeah, they've got the advantage. But this is also something that's been going on for over a century now; it wasn't induced by government handouts.

And annoying though it may be at times, larger companies do tend to be more efficient. Insofar as a modicum of competition can be maintained (ideally through anti-trust regulation), those efficiencies tend to get passed back to the consumer as savings. Certainly, that should apply to retailers, manufacturers, agribusiness, and many other consumer-driven businesses, the airlines among them; if those companies fail, their tangible assets just change ownership and the new owners will implement rational business policies using fresh capital. And if the failure was due to too much production, then the companies were not in fact too big to fail, they were just too big. Sometimes that's politically unpopular, so sometimes (as with GM), we prop up the brand name...because we're dumb like that.

Financial institutions need to be viewed as an entirely separate category. Their productive assets are largely intangible, and if they are too large and they structure deals in such a way as increases systematic risk, they can bring down the entire global economy. Airlines cannot be compared to them; the worst thing that an airline can do is perform crappy maintenance, hire crappy pilots, and crash planes. That's nothing.

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Larger companies enjoy a lower Weighted Average Cost of Capital (WACC) because they tend to have less exposure to risk than do their smaller brethren. And between the economies of scale that they can generate and their attractiveness to young professionals whose eyes glaze over at the mere thought of associating themselves with a national brand...yeah, they've got the advantage. But this is also something that's been going on for over a century now; it wasn't induced by government handouts.

And annoying though it may be at times, larger companies do tend to be more efficient. Insofar as a modicum of competition can be maintained (ideally through anti-trust regulation), those efficiencies tend to get passed back to the consumer as savings. Certainly, that should apply to retailers, manufacturers, agribusiness, and many other consumer-driven businesses, the airlines among them; if those companies fail, their tangible assets just change ownership and the new owners will implement rational business policies using fresh capital. And if the failure was due to too much production, then the companies were not in fact too big to fail, they were just too big. Sometimes that's politically unpopular, so sometimes (as with GM), we prop up the brand name...because we're dumb like that.

Financial institutions need to be viewed as an entirely separate category. Their productive assets are largely intangible, and if they are too large and they structure deals in such a way as increases systematic risk, they can bring down the entire global economy. Airlines cannot be compared to them; the worst thing that an airline can do is perform crappy maintenance, hire crappy pilots, and crash planes. That's nothing.

Niche do you know how to do WACC? I hate those WACC problems!

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Niche do you know how to do WACC? I hate those WACC problems!

Taking a corporate finance class, are you? The subject matter on WACC was easy enough by my recollection. But then, I always thought that my finance coursework was too superficial. Hopefully you've been getting more challenging instructors.

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ok rgr. you're going to have to post some links or stories that we don't have to subscribe to.

sorry about that. just type continental united merger in google and you should be able to access them. you might have to then hit "news results for continental united merger."

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Rather than the petulant whining about how it's not fair, where is the discussion about the broader implication--

that increasingly, the only viable American business model is Too Big Too Fail. It's the new monopoly: just 2 or 3 giants (media, autos, airlines, banks, agribusiness, etc) because the small players cannot survive against the bohemoths, and the bohemoths can only survive with constant government handouts.

Would the merger not require an anti-trust review? Of course, to your point, America has long since moved from promoting competitiveness to oligopolies.

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That's not true at all, really. Corporate welfare is popular in Texas and has become something of a cottage industry. We have 4A/4B sales taxes supporting economic development and the Texas Enterprise Fund. And you'd better believe that folks from the Governor's economic development office are in a bidding war with Chicago right now, whether it gets publicized or not.

It appears you're right: http://www.chron.com/disp/story.mpl/business/6973778.html

Though, I think Mayor Parker should have already spoken to Continental officials by now.

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Would the merger not require an anti-trust review? Of course, to your point, America has long since moved from promoting competitiveness to oligopolies.

...oh... it will...

...and who... do we all know... that is from Illinois?

That's right. The man in the White House (his administration)

Let's see... merge... and then relocate to Chicago... APPROVED!

Merge... and then move to Houston... Not gonna happen.

All this whining about CO moving out of a city of FOUR MILLION.

They are just tiny little rain drop.

The idea that CO management being in charge of the new "United"...

Maybe the top 50 CO managers, starting with the CEO on down.

They're in for a rude awakening if they think they're gonna change the United culture up there, especially as they get into middle management.

They will be eaten alive.

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...oh... it will...

...and who... do we all know... that is from Illinois?

That's right. The man in the White House (his administration)

Let's see... merge... and then relocate to Chicago... APPROVED!

Merge... and then move to Houston... Not gonna happen.

All this whining about CO moving out of a city of FOUR MILLION.

They are just tiny little rain drop.

The idea that CO management being in charge of the new "United"...

Maybe the top 50 CO managers, starting with the CEO on down.

They're in for a rude awakening if they think they're gonna change the United culture up there, especially as they get into middle management.

They will be eaten alive.

Okay, people need to seriously stop acting like this is some conspiracy with Obama. Yes, Houston would be a better choice for the HQ (in my opinion), but the merge rumors so far are the exact same as the ones in 2008...when someone from Texas was in the White House. Bush I think?

And then again, this is all just rumors, as far as the HQ goes. Hopefully what Niche said was true (with Houston/Texas leaders fighting for the HQ). I know the HQ story is getting more play in the Chron.

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Okay, people need to seriously stop acting like this is some conspiracy with Obama. Yes, Houston would be a better choice for the HQ (in my opinion), but the merge rumors so far are the exact same as the ones in 2008...when someone from Texas was in the White House. Bush I think?

And then again, this is all just rumors, as far as the HQ goes. Hopefully what Niche said was true (with Houston/Texas leaders fighting for the HQ). I know the HQ story is getting more play in the Chron.

Those same Houston/Texas leaders have also been fighting hard to "save JSC" "save NASA" ...

Hang up, dial tone.

Thank heavens for this story getting more play in the Chron. Maybe now, CO will be saved.

CO is walking into a buzz saw... they just don't know it.

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Those same Houston/Texas leaders have also been fighting hard to "save JSC" "save NASA" ...

Hang up, dial tone.

Thank heavens for this story getting more play in the Chron. Maybe now, CO will be saved.

CO is walking into a buzz saw... they just don't know it.

"Save JSC"? "Save NASA"? You act like those fights are over with. Especially with NASA. I don't know why people thought NASA was going away. It also doesn't look like the JSC will lose many jobs. Instead, they'll be transferred to the new program. People are just upset that Constellation is over...

As for Continental, I'm sure they know the buzzsaw they are walking into. With US Airways out, Continental will have more leeway. People are taking a story from the Chicago Tribune about the HQ staying in Chicago. Don't you think there will be a little bias in there? Plus, they say United would keep the name. Why would Continental want to lose its name and have to move? One has to stay, and I think Houston will remain the HQ, but United will be the new name.

The days of Chicago trumping cities like Houston and Dallas are over, as these two cities are coming up. Chicago the past, Houston the future. Even Chicago's international migration has fallen by a bunch and Houston and Dallas have similar numbers with it now.

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I wish Continental was still under the leadership of Gordon.

If CO were smart, they'd let United and US Airways both fail and then pick up the scraps. It makes no sense to give into the merger pressure now when just TWO short years ago, CO announced that United was a big fat mess and they'd prefer to go it alone. Nothing has changed since then. UA still bleeds $$$ and UA still has a terrible reputation. I guess CO thinks the only way to compete with the Delta/Northwest behemoth is to match her size.

Bad idea, homie.

Oh well, as a 15 year loyal Continental flyer, I guess I will have to get used to the possible change. Maybe I'll switch my domestic flying to Southwest out of Hobby when I can, but man do I hate the idea of having to fly United. I flew United for 4 years when I was in college (the only connection option available) and I had nothing but horrible experiences; everything from missed connections, lost luggage, and even an emergency landing in MCI that I was later told was "weather related" and therefore I'd have to pick up my own hotel room due to being stranded by a broken plane!!!

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I wish Continental was still under the leadership of Gordon.

If CO were smart, they'd let United and US Airways both fail and then pick up the scraps. It makes no sense to give into the merger pressure now when just TWO short years ago, CO announced that United was a big fat mess and they'd prefer to go it alone. Nothing has changed since then. UA still bleeds $$$ and UA still has a terrible reputation. I guess CO thinks the only way to compete with the Delta/Northwest behemoth is to match her size.

Bad idea, homie.

Oh well, as a 15 year loyal Continental flyer, I guess I will have to get used to the possible change. Maybe I'll switch my domestic flying to Southwest out of Hobby when I can, but man do I hate the idea of having to fly United. I flew United for 4 years when I was in college (the only connection option available) and I had nothing but horrible experiences; everything from missed connections, lost luggage, and even an emergency landing in MCI that I was later told was "weather related" and therefore I'd have to pick up my own hotel room due to being stranded by a broken plane!!!

There are two problems with that strategy. The first is that the government has a track record of not allowing airlines to fail, so it is unclear whether there will be any scraps for Continental that'd be worth bothering with...all fat, no meat. The second problem is that a combined Delta/Northwest is in a better position to snap up anything that's missing from their system. And the third problem is that a combined Delta/Northwest is in a better position to wage a price war on strategically-important overlapping routes in their system or in places that Continental might consider expanding to.

I agree that Continental and United would face some huge problems in integrating different corporate cultures. I also think that Chicago is probably a city that they ought to stay away from. Everything costs more.

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There are several airlines that were allowed to fail in US history. Eastern, Pan Am, Braniff, and others were all allowed to go under and then a bidding war broke out for their prized assets.

The general line of thinking is that the industry needs at least one and probably two "major" carriers to fail. United and US Airways are both coming out of bankruptcy and nothing has changed for either of them.

As for Delta being able to outbid Continental or American for the pieces, that simply wont happen. The DOJ under the Obama Administration would very likely step in and forbid the sale of United's valuable Pacific operation to Delta or US Airways Northeastern shuttle service operation at DCA, LGA, and BOS. Those are the two main prizes that those carriers own and the US Government would never allow Delta to pick those up (if they did, Delta would OWN the shuttle service as well as Tokyo Narita).

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There are several airlines that were allowed to fail in US history. Eastern, Pan Am, Braniff, and others were all allowed to go under and then a bidding war broke out for their prized assets.

The general line of thinking is that the industry needs at least one and probably two "major" carriers to fail. United and US Airways are both coming out of bankruptcy and nothing has changed for either of them.

As for Delta being able to outbid Continental or American for the pieces, that simply wont happen. The DOJ under the Obama Administration would very likely step in and forbid the sale of United's valuable Pacific operation to Delta or US Airways Northeastern shuttle service operation at DCA, LGA, and BOS. Those are the two main prizes that those carriers own and the US Government would never allow Delta to pick those up (if they did, Delta would OWN the shuttle service as well as Tokyo Narita).

That all makes sense. But it's not good enough. I wouldn't bank on it without some kind of an enforceable guarantee that the government were going to allow or disallow certain acquisitions and industry practices. And that's not in place.

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As for Tokyo, it wouldn't just be the US government that wouldn't allow it but also the Japanese feds. Narita is slot restricted and the only two US carriers that are allowed onward flights were/are Northwest and United. Delta now owns the Northwest Tokyo hub which includes several onward flights to smaller and/or further away Asian destinations that wouldn't be able to support service to the US via non-stops. United also has such flights. There is NO WAY Japan would allow Delta to get those flights because then Delta would be operating a legitimate foreign hub that could compete with JAL and ANA. Simply not gonna happen.

And as for evidence as to why the US feds wouldn't allow Delta to get their hands on US Airways' northeastern shuttle service (the only one that currently competes with Delta), see the recent refusal to grant Delta and US Airways request to swap slots at New York LaGuardia and Washington National.

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Things have stalled due to disagreements on stock prices.

I heard it through a little birdie that Smisek was set to be in Chicago this week so I'm sure they're trying to hash this out.

About the Tokyo slots. I can see UA changing it's strategy a bit there to create more 5th Freedom flights to different Asian destinations. At the same time expanding the Guam operations that Continental currently runs. The Micronesia routes are some of the most profitable for the company and there is a lot of potential for even more flights. In fact, Continental has already suggested that increased operations are coming by moving more planes to Guam and starting up some of the older routes (Guam to Hong Kong).

With Haneda being opened up to U.S. traffic, if the DoJ approves the EWR-HND route, I could see one of the airlines reducing flights to Narita and adding one to Haneda for the business travelers. That would free up a few slots at Narita for other operations.

The LaGuardia and Reagan slot swap between Delta and US is still being worked on, now trying to stay within the FAA guidelines that were set forth. The DoJ and FAA are trying to encourage competition at the airports by making each airline divest of a number of slots that they receive in the swap. If the deal doesn't go through in this next revision then it's likely Delta and US will just keep competing heavily with each other on the route.

It will not be too long until Delta has to do something drastic to keep their route network sustainable. They have a lot of capacity in places where it shouldn't be and they'll pay for it.

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Smisek going to Chicago? The article also says that the HQ would be in Chicago. Not much fight from the Texas side I guess, and it looks like United is running things. Continental needs a new CEO.

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Smisek going to Chicago? The article also says that the HQ would be in Chicago. Not much fight from the Texas side I guess, and it looks like United is running things. Continental needs a new CEO.

Just remember that the way it is looking if this goes through is that Smisek will be the CEO of the merged company. I'd be ok with that, Tilton hasn't been the best CEO at United, that's for sure.

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It may have already been addressed, but what happens to IAH if this happens? Do we become just a fly-by-night airport all of a sudden? Does anybody know what happened to DIA or DET after Continental pulled out and NW left respectively?

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...oh... it will...

...and who... do we all know... that is from Illinois?

That's right. The man in the White House (his administration)

Let's see... merge... and then relocate to Chicago... APPROVED!

Merge... and then move to Houston... Not gonna happen.

All this whining about CO moving out of a city of FOUR MILLION.

They are just tiny little rain drop.

The idea that CO management being in charge of the new "United"...

Maybe the top 50 CO managers, starting with the CEO on down.

They're in for a rude awakening if they think they're gonna change the United culture up there, especially as they get into middle management.

They will be eaten alive.

Actually we're closer to 6 MILLION people in the Houston area. Chicago has ~9 million and some experts believe Houston is on pace to become the 3rd largest city in the country by 2030. We have more fortune 500 companies (25 vs their 22) and home to headquarters of precious commodities that have gotten the airlines in trouble to begin with--OIL PRICES. Houston is clearly the better choice.

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