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Top Three Reasons Why United Will Have A Difficult Time Merging (with Continental)

Number 3:  If United would merge with Continental the problem is not merging the fleet or designing a new route structure.  The problem doesn’t lie within the unions, they have been preparing for a merger for years now.  The problem isn’t even with the management.  Continental management would take over and run the company with the best abilities.  The big number 3 problem is that when Continental was in bankruptcy a few years back they took a big lump of money from Northwest Airlines.  So NWA has a huge investment in the airline.  You got to love those code share partners dumping their money into other airlines.  Excellent move on NWA’s part but not good for Continental if they want to merge or do anything really.  It would never be approved by NWA.  So Continental was probably hoping that NWA would just start liquidating but that has yet to happen. 

Number 2:  The old guys at the U.S. Department of Transportation, with input from the Justice Department, would have to approve any such mergers.  And it does not look promising for any such large mergers to be approved on the fears that mega mergers would create less competition, drive up ticket prices, and give consumers fewer choices.  If approved though, look for the other carriers (American, Delta, Northwest) to start searching for a merger partner quickly. 

Number 1:  Money! Money! Money! No carrier out there has the money to even think about merging.  It is going to take a lot of cash to allow any carrier to start the process.  The only way that America West was able to purchase US Airways was a large injection of cash from outside sources.  If United were to do this, it would need twice if not more in cash.  It would mean combining the second largest carrier in the and the fourth (Continental), that would take a lot of money.  More than any carrier has on hand. 

Having said all that, the rumors will continue to circulate.  We may even seen a merger.  Who knows.