Lester Benchmarking

Company 1 - United Airlines

Situation Facing Company

A current article in Business Week Online reports that UAL Corp., parent company of United Air Lines, has hired Goldman Sachs & Co. to advise it on financial alternatives including a possible merger. Crain’s Communications’ Chicago Business reported that people close to United expect Goldman to help the airline assess the value of its domestic and international holdings, advise it on sales or purchases of domestic or international routes and scout for mergers.

Company response to issue

United Air Lines (UAL) has been talking about a possible merger. UAL has reportedly hired Goldman Sachs & Co to advise them on their financial alternatives UAL has just emerged from bankruptcy. The company wants to assess the value of its domestic and international holdings and is seeking advice on sales or purchases of domestic or international routes that may be available for mergers. Two companies have been mentioned, Continental Airlines Inc., based in Houston, and Atlanta based Delta airlines Inc. (Business Week Online, 2006)

Outcomes

Shares rose Monday amid reports the United Air Lines parent may be looking for a merger partner. Stock in UAL gained 2.7% in price to $28.58 per share in early NASDAQ trading on Monday, Sept. 25. Chief Executive Glenn Tilton had already hinted to reporters about plans for consolidation in recent days. He had said in a speech Thursday to the Executives' Club of Chicago that United’s parent UAL is on solid footing to participate in the merger and acquisition market, according to a Dow Jones Newswires report on Sept. 21. Tilton said that someday U.S. airlines may become financial partners with airports and commended the German airline Lufthansa AG's investment in companies that operate airports in Germany, according to Dow Jones.(Business week online, 2006).

Company