United and Continental Airlines are joining to form the world's largest airline in a $3 billion deal, the carriers will announce today. The merger will test the notion that the money-losing airline industry can work better on a large scale—and test the Obama administration's antitrust regulators. While the companies see the deal as a merger of equals, United will dominate. The airline will keep the United name and United's Chicago headquarters, and United shareholders will own about 55% of the company.
Both carriers have been losing money. Continental posted a $282 billion loss in 2009, and United tallied a $651 million loss. The combined airline is betting on appealing to corporate travelers with a wide choice of departure times and a worldwide network from South America to Shanghai. A similar Delta-Northwest deal cleared the federal government 18 months ago, but that was under the Bush administration. One analyst estimates the odds that the Obama Justice Department will approve a mega-airline deal at just 75%, AP reports.
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