More consolidation for the airlines...

In Topic 10 of the new edition of the book I look at mergers and acquisitions which is a key area in corporate and finance. The latest example to hit the press has been the merger between United Airlines and Continental Airlines which has created the world's biggest carrier. Both these companies are currently loss-making and this deal is forecast to produce cost savings of more than $1bn a year. The newly named combined group, United Airlines, will link the current Continental colours with the United Airlines name. The deal had a positive impact on the share prices of both firms which rose in early trading in New York. United Airline's parent UAL Corporation saw its shares rise by 2.37%, to close in New York at $22.11. At the same time Continental shares went up by 2.28%, to $22.86.

It should be said that despite the fact that United is being viewed as the dominant partner the merger is being seen as "a merger of equals". Glenn Tilton, United's chief executive, said that the merger "will provide a strong platform for sustainable, long-term value for shareholders". Most stock market analysts backed the deal due to the potential synergies (see page 160 of the book) and also the possibility that fares can be raised on routes where they used to compete.