United Airlines’ merger talks with Continental Airlines are progressing
rapidly, and many of the key issues involved with melding the carriers have been resolved, said a person close to the talks.

Telephone calls are flying between carriers’ management teams and their directors, and a deal could be completed as soon as next week.
The merged airline, which would be the largest in the world, would be headquartered in Chicago, where United is already based, the person said. Continental CEO Jeff Smisek would be named chief executive of the carriers, while United CEO Glenn Tilton would serve as non-executive chairman.

The carriers reportedly would consummate the deal through a straight stock swap with no market premium, Bloomberg News reported Thursday. Wall Street appears to have anticipated that possibility, since United and Continental shares have been trading in tandem in recent days.

However, US Airways’ announcement Thursday that it would no longer continue merger talks with United could remove some of the urgency from the talks, which have been in high gear for the past week, sources cautioned.

Continental’s board, which had favored a slow integration of the carriers and their joint ventures, could decide to allow additional time to study the deal, now that US Airways is out of the picture.

In a highly unusual move, US Airways announced Thursday that its board had decided to not pursue talks with United.

The statement by US Airways Chairman and CEO Doug Parker signaled the anger and frustration that executives of the Phoenix-based carrier felt toward United. The latter put discussions on hold last week, days ahead of a planned merger announcement, to focus on a potential deal with Continental, say people close to US Airways.

“I am sure some ‘industry experts’ will suggest that US Airways will be strategically harmed if United now chooses to merge with Continental,” Parker said in an April 22 letter to US Airways employees. “They will be wrong…Should our competitors choose to merge and help create a more stable airline industry, our independent airline will only become stronger.”

The rupture between United and US Airways doesn’t mean that they wouldn’t return to the negotiating table at some point in the future, sources said. Phoenix-based US Airways would also be a potential partner for American Airlines, which would fall to a distant third in the U.S. market, should the United-Continental deal be completed.

(Source: Chicago Breaking News)