Boards clear United-Continental merger for takeoff

The airlines’ boards approved the transaction yesterday, and the deal will be announced today, said the sources, who asked not to be identified because the terms were not public. Their combined equity value would be about $8.3 billion, one person said.

United and Continental together would take the top spot in global traffic from Delta Air Lines Inc., have New York and Washington hubs, and be the busiest US carrier on the high-fare routes across the Atlantic and Pacific. Annual cost savings and new revenue should reach $1 billion to $1.2 billion by 2013, a source said.

“These two companies coming together was kismet,’’ said Ray Neidl, an independent airline analyst in New York. “It was destined to happen because this creates truly a worldwide system. They need the market size to effectively compete’’ with Delta, he said.

United’s name and Chicago headquarters will be retained, the people said. Continental’s chief executive, Jeff Smisek, 55, will become the CEO of the merged airline, and United’s Glenn Tilton, 62, will be the chairman, the sources said.

Spokeswomen for United and Continental declined to comment.

The $8.3 billion combined value includes the impact of options and convertible securities, a person with knowledge of the terms said. UAL will swap 1.05 shares for each Continental share, the people said.

Based on April 30 closing prices, UAL had the third-largest market value among US carriers, at $3.63 billion, followed by Continental at $3.12 billion.

UAL shares gained 13 cents to $21.60 Friday, while Continental’s slid 35 cents to $22.35.

Together, the airlines fly to 370 destinations in 59 countries; they plan to continue offering service to all those points, a person with knowledge of the matter said.

United and Continental are ranked third and fourth in the United States by traffic.

They had almost $29 billion in combined revenue last year.

Their main jet fleets total 700 aircraft, and they employ more than 88,000 workers. In addition to Washington and New Jersey’s Newark airport, their other hubs are in Chicago, Denver, San Francisco, Los Angeles, Houston, Cleveland, and Guam.

Delta vaulted to the top of the worldwide industry, by traffic, after buying Northwest Airlines Corp. in 2008, spurring talks on consolidation across the US industry.

The current deal comes two years after Continental, then led by Larry Kellner, came within hours of approving a merger with United before walking away.

The discussions restarted last month, after The New York Times reported that UAL was in merger negotiations with US Airways Group Inc.