United and Continental Airlines are attempting to create maximum fleet flexibility in their combined merger, and are targeting a combined fleet of 550 to 750 aircraft by 2014.

The two companies unveiled their badly kept plans to merge earlier today, and Continental CEO Jeff Smisek admitted he was driven to contact his counterpart at United Glenn Tilton by United's merger discussions with US Airways.

Smisek says the projected fleet range allows the combined carrier, which will retain the United name but feature the Continental livery and colours, to "flex up or flex down" in response to market conditions.

Smisek and Tilton during a call with analysts gave little insight into the fate of United's firm order for 25 Airbus A350s. Tilton only says the "utility" of the A350 has not changed.

Significant issues surrounding the combined entity's management structure, labour and operations remain unresolved, and Tilton and Smisek are forming an integration team to examine the executive make-up of the new airline.

While there are likely to be fence agreements with labour groups in place from the time of the legal closing of the merger to the official combining of operations, Smisek says in order to have the appropriately sized company, individuals will lose jobs in Chicago and Houston.

Smisek stresses even though the combined entity will be headquartered in Chicago, Houston is pegged to become the largest hub for the new United.

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 ©United and Continental


It remains to be seen the specific role secondary hubs such as Cleveland will play in the combined carrier's network, which will feature 10 hubs. Smisek explains it is premature to talk about how Cleveland, or any the hubs will fit into the new network.

Responding to a question about the combined United forging a relationship with a low cost carrier similar to the tie-up between JetBlue and American Tilton simply states: "We have exactly what we need."

United and Continental are aiming to close their merger transaction by year-end, and are targeting to receive a single operating certificate from the US FAA by mid-2012.

The combined revenue and cost gains should generate net annual synergies of the combined entity of $1 to $1.2 billion. Roughly 75% of that total should be achieved in 2012, says Smisek, with the remaining 25% following in 2013. United and Continental calculated those synergies by overlaying the combined current fleets of the two carriers.

Smisek also estimates the combined entity should transport roughly 144 million passengers annually.

Neither executive has any anxiety about receiving approval from the US Department of Justice (DOJ) for the merger. In a formal presentation the carriers point out there are 81 US domestic United destinations not served by Continental and 42 of Continental's domestic cities are not currently included in United's network.

Confirming the United-US Airways talks were a driving force in Continental's decision to renew merger talks with United, Smisek jokes that Continental didn't want United "to marry the ugly girl".

Smisek formally contacted Tilton to discuss a merger on 9 April.

Source: Air Transport Intelligence news