United Airlines announces deal to buy Continental

United Airlines has agreed to buy Continental in a $3 billion-plus deal that would create the world's largest carrier with a commanding position in several top U.S. cities.

The new United would surpass Delta Air Lines in size, which should help it attract more high-fare business travelers. It will fly to 370 destinations in 59 countries.

The companies insisted the deal is a merger of equals.

But United shareholders will hold a majority stake, the airline will be based in United's hometown, Chicago, and it will be called United.

It would be run by current Continental CEO Jeffery Smisek, however. United CEO Glenn Tilton, a longtime advocate of consolidation in the airline industry, will be non-executive chairman for up to two years before Smisek adds the chairman title.

The new parent company will be called United Continental Holdings Inc., and have $29 billion in annual revenue based on 2009 results and $7.4 billion in unrestricted cash. The airlines said combining would save them $1 billion to $1.2 billion a year by 2013, including $800 million to $900 million in new yearly revenue.

Both airlines serve Lexington's Blue Grass Airport through their Express carriers.

Shares of both companies closed higher Monday. United's parent, UAL Corp., shares gained 51 cents, or 2.37 percent, at $22.11. Continental shares rose 51 cents, or 2.28 percent, to $22.86.

The companies expect to close the deal in the fourth quarter, with approval needed from shareholders and regulators.

The deal came together in just three weeks after reports surfaced that United was in discussions with US Airways, the nation's No. 6 airline.

"I recognized that United is the best possible partner for Continental," Smisek said during a conference call. "I didn't want him (United's Tilton) to marry the ugly girl; I wanted him to marry the pretty one, and I'm much prettier."