Continental responds to Delta, Northwest merger

Continental Airlines Inc.'s top management sent a letter to the company's 45,000 employees Tuesday following the $17.7 billion Delta Air Lines Inc. merger deal with Northwest Airlines.

"This merger will change the competitive landscape for Continental and the entire airline industry," Chairman and Chief Executive Officer Larry Kellner and President Jeff Smisek write in the letter. Because of that the company plans to review its strategy in order to keep the airline competitive, they write.

The two managers also write that as a result of the Delta/Northwest merger agreement, Continental (NYSE: CAL) can redeem the "Golden Share" Northwest owns in the company as well as review its alliance with the two airlines and SkyTeam.

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In January, the Houston Business Journal reported that the Delta/Northwest merger might pave the way for a possible Continental Airlines Inc. merger with United Airlines.

The Delta deal, which is awaiting government approval, will keep the headquarters of the new airline, named Delta (NYSE: DAL) in Atlanta, will cause no hub closures and will help the carriers weather the pressures of rising fuel costs, according to the two airlines. The new airline will have some $35 billion in annual revenue and about 75,000 employees. It will run a fleet of 800 aircraft that will provide access to more than 390 destinations in 67 countries.

Reuters reported late on April 14 that Houston-based Continental and Chicago-based United, whose parent is UAL Corp. (NASDAQ: UAUA), have laid most of the groundwork for a merger and sources close to the matter said a deal could happen "pretty quickly."

Capt. Jay Pierce, leader of the local Continental pilots' union, which is represented by the Air Line Pilots Association International, said Tuesday that the pilots are preparing for a possible merger and recently approved a special merger assessment to fund any expenses related to a merger.

"We still contend that Continental is, and would be, successful as a stand-alone airline," Pierce said. "But we're not going to stand by and watch as our futures are controlled by others.

"Pilots on both sides of a merger must be fully involved and will play a significant role in the success or rejection of an attempted merger."