Why is this man smiling?
Well, it appears United Airline's chief Glenn Tilton is about to get his Christmas gift early. It's a big box of cash wrapped up in an airline merger.
The CEO of UAL Corp., parent company of United Airlines, has long advocated airline industry consolidation, especially when it came to merging United with a rival carrier. This week, there's word that UAL is exploring a merger with Atlanta-based Delta Air Lines.
(The two airlines denied negotiations were underway but conceded some discussion took place. One newspaper headline said the airlines "scoff" at merger talk, whatever that means. I scoff at their scoffing because something is brewing.)
While Delta is the current favorite, don't rule out a possibility that Houston-based Continental Airlines makes a play for United. Heck, there could even be a bidding war. Blending the United-Continental carriers' domestic and international route structures may make greater operational sense than hooking up with Delta. However, a United-Continental marriage may not produce the mammoth cost-reductions of a Delta deal and investors won't like that at all.
Moreover, I doubt federal anti-trust regulators will stop either of these big airline mergers from being completed.
Right now, details are still coming out, including the total value of the proposed United-Delta merger.Still to be determined is how great a payout Tilton and the other UAL brass will get. I guarantee you it's going to be a horn of plenty, considering the number of stock options each of them hold. Tilton made $11 million over the past four years and holds about $21 million worth of UAL stock, according to Forbes (which also took that fine photo that appears on top of this post.)
Should the Delta deal go through, Tilton will probably hang around for a short time as chairman, or some other high but perfunctory title, while Delta CEO Richard Andersen runs the much-larger airline.
No matter who's in charge, employees of both airlines are in for another tough go.
A United-Delta merger will yield at least $500 million in savings--and that's a conservative estimate. How will these cost "synergies" come about? The usual way: Lay-offs, benefit reductions and the consolidation of some ground operations. United is also likely to retire some of its older gas-guzzling jets, too. After all, fuel costs are skyrocketing and threaten to break the $100-per-barrel mark.
United employees, who gave back lots of money and benefits when the carrier went through a protracted bankruptcy reorganization a few years ago, can especially look forward to more pain and little gain.
Which makes you wonder: Why would anyone, besides people like Glenn Tilton and UAL's top execs, want to work for an airline these days?