New Continental letter silences merger talks

Houston-based Continental Airlines Inc. has sent a letter to its 45,000 employees stating that the company's board has chosen not to merge at this time.

In the letter, Chairman and Chief Executive Officer Larry Kellner and President Jeff Smisek write that "the board very carefully considered all the risks and benefits of a merger with another airline, and determined that the risks of a merger at this time outweigh the potential rewards, as compared to Continental's prospects on a standalone basis."

The April 27 letter comes almost two weeks after Atlanta-based Delta Air Lines Inc. (NYSE: DAL) announced it would merge with Minnesota-based Northwest Airlines in a $17.7 billion deal.

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At the time of the Delta/Northwest announcement, Kellner and Smisek wrote to employees, "This merger will change the competitive landscape for Continental and the entire airline industry." Because of that, they wrote, the company planned to review its strategy in order to keep the airline competitive.

News agencies as late as April 25 were reporting that Continental (NYSE: CAL) was still talking merger with Chicago-based United Airlines (NASDAQ: UAUA) as well as Dallas-based American Airlines (NYSE: AMR).

The Continental pilots union, represented by the Air Line Pilots Association International, issued a statement Monday in support of the airline.

"We've maintained throughout this process that we support management's preference to operate Continental Airlines as a successful, viable stand-alone carrier," said Capt. Jay Pierce, chairman of the Continental pilots union. "We believe that despite the challenges of high fuel prices and an uncertain economy, there are benefits to our pilots in maintaining independence."