United, Continental to merge

CHICAGO — United and Continental Airlines are expected to announce this morning that they are combining operations to form the world's largest airline after their boards voted to approve the deal this afternoon, sources said.

The deal is the culmination of a lengthy search by United CEO Glenn Tilton for a partner that would bolster his carrier's global network and that would promote consolidation in a badly fragmented industry plagued by chronic losses.

Continental CEO Jeff Smisek will be named CEO of the new carrier, while Tilton will move to its board as non-executive chairman for a two-year term, said a person familiar with the deal.

Combining Continental and United would leave the U.S. with three big international airlines — the new United, Delta and American. US Airways Group Inc. also flies internationally, but its 2009 international traffic was less than one-third the size of American's.

The new airline, to be named United, will retain its world headquarters in Chicago, where United currently employs about 700 people, sources said.

Unlike the earlier merger that United had contemplated with US Airways, this deal isn't expected to involve large-scale cuts since United's and Continental's networks have little overlap. The carriers expect to continue serving the 370 cities where United or Continental currently fly.

Rather, executives hope that linking Continental's strong Latin American and Europe routes to United's connections in Asia will generate a surge of new international traffic and revenues.